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Support.com (NASDAQ:SPRT) holds its special meeting on Sept. 10 to vote on its merger with Greenridge Generation Holdings. The merger’s acceptance requires that more than 50% of owners of SPRT stock vote to approve the deal.

The two parties announced their merger on March 22. The day before the merger announcement, SPRT closed at $2.14. Now it’s trading at nearly $22. 

How many stocks do you know that have that kind of five-month performance? Very few. According to Finviz.com, out of 319 stocks that have doubled or better in 2021, SPRT is second best, trailing only AMC (NYSE:AMC). 

I’m no fan of the theater chain, but if forced at gunpoint to buy one of the two stocks, AMC wins hands down.   

The idea of bringing together a customer support business desperate for some value-add for its shareholders with a company that’s not sure if it’s an energy company or a Bitcoin (CCC:BTC-USD) operation is a worthwhile investment seems ludicrous. 

Yet, here we are, days from a vote that asks SPRT shareholders to believe one plus one really does equal three. 

It doesn’t. Here’s why. 

SPRT Stock Pre-Merger Announcement

Support.com went public in July 2000. It sold 4.25 million shares at $14 apiece. It got its start in December 1997. 

“We provide eBusiness infrastructure software that automates, personalizes and enhances user support over the Internet. Our eSupport software is designed to accelerate eBusiness growth and to increase customer satisfaction and retention,” states page 3 of its IPO prospectus. 

In 1999, it had $3.2 million in revenue and a $13.7 million operating loss. In 2020, it had $43.9 million in revenue and an operating profit of $52,000. Going back over its 10-k’s between 2001 and 2020, Support.com’s best year for sales was 2013 when it generated $88.2 million on the top line and a $10.8 million operating profit. That appears to be its best year for profits, too. 

In 2013, SPRT stock got as high as $17.22, or thereabouts. After that, it hadn’t come close until its massive surge in August. 

This is the first time I’ve covered the stock; I’ll assume most people already know that Greenridge is using the company to go public. It likely has no long-term interest in running a customer support business.

Think of SPRT as a special-special purpose acquisition company, or SSPAC. It adds little value to the equation. 

So, rather than 1+1=3, investors are likely hoping it’s more like 0.5+1.5=3. But I digress. 

An Energy Company or a Bitcoin Miner?

In mid-August, InvestorPlace’s Chris MacDonald discussed what Greenridge and Support.com bring to the table in their merger. 

“Greenridge reported it expects to end the 2021 calendar year with $50 million in EBITDA (earnings before interest, taxes, depreciation and amortization). The company expects this run rate to improve to $160 million by 2022,” MacDonald wrote on Aug. 13.

“As part of the deal, Support.com will provide $33 million to the combined entity. At closing, it’s expected investors in SPRT stock will have 8% of the merged company.”

As page 20 and 21 of the March presentation explaining the benefits of the merger points out, Greenridge’s EBITDA is expected to grow from $6 million as of February 2021 to $52 million in 2021, and $109 million in 2022. Those last two estimates are based on a Bitcoin price of $49,000.

In the latest 12 months ended February 2021, Greenridge had 17 MW (megawatts) capacity that mined 1,186 Bitcoins generating $26 million in revenue. 

On page 7, it points that the 26 MW mining capacity consists of 7,800 Bitcoin miners. That’s 300 miners per MW. Based on 17 MW, that’s 5,100 miners that produced 1,186 Bitcoin, or 0.23 Bitcoin per miner. So based on 85 MW mining capacity in 2022, we’re looking at 25,500 miners. Multiply that by 0.23 Bitcoin, and you get 5,865 Bitcoin produced in 2022. 

So, based on the 2022 estimated run rate, revenue will be $206 million, or $35,124 per bitcoin. Subtract the cost to mine one Bitcoin is $2,869; the profit potential is intriguing. 

Why, then, did it take Greenridge four years to get to $26 million in revenue? Does it have everything to do with the price of Bitcoin? Or is it because it originally intended to run the power plant as an energy company, but the rising price of Bitcoin made it pivot? 

We’ll probably never know the actual true story.

I can see the appeal for Support.com management and insiders to want this deal to go through. If it gets anywhere near the projections of revenue and EBITDA, the 4% stake (plus the 8% stake for its other shareholders) will be worth considerably more than if it continued operating as an internet customer support service provider.

It’s an excellent Hail Mary; I don’t know whether it will work or not. You’re on your own on this one. 

On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.

Altcoin gains leave bitcoin gains in the dust… the fundamentals and technicals look healthy … one altcoin that has exploded, and could double from here

 

Before we jump into today’s Digest a quick note…

Our InvestorPlace offices will be closed tomorrow and Monday in honor of Labor Day.

If you need any help from our Customer Service team, they will be happy to assist you on Tuesday when our offices reopen.

We’ll be publishing the Digest us usual tomorrow, but will also take off Monday.

Have a wonderful Labor Day weekend!

Moving on to today’s Digest…

***If our crypto specialist, Luke Lango, is right, brace yourself

We believe the fundamentals, optics, and technicals all imply that this big rally could end up looking something like the 2013, 2017, and 2020 rallies in Bitcoin – and if so, that would put us in just the first inning of this 2021 breakout.

Needless to say, these are exciting times.

Bitcoin’s price action is exciting, and we do see the “poster child” cryptocurrency running to $100,000 within the next 12 months.

But more importantly, the opportunity in altcoins gets us most excited.

In today’s Digest, let’s review Luke’s most recent issue of Ultimate Crypto, which came out on Tuesday.

It covers bitcoin’s rally since July… the recent, explosive price action in certain top altcoins… continuing crypto adoption – both here in the U.S. and abroad… and we’ll even look at why the biggest gainer in the Ultimate Crypto portfolio – a 7,000%+ winner – might be doubling from here.

Lots to cover. Let’s jump in.

***Checking in with the grandaddy crypto first

For newer Digest readers, Luke is our hypergrowth investment expert. And few sectors offer greater potential for hypergrowth than cryptocurrencies. Altcoins have been some of the most lucrative investments of the past several years – some rising, literally, thousands of percent, creating fortunes in the process.

Now, even though Ultimate Crypto focuses on these cutting-edge altcoins, bitcoin is seen as the barometer of the crypto sector. So, this is where our analysis should start.

As crypto investors know all too well, bitcoin suffered a brutal bear market beginning in the spring.

From mid-April through late-June, it lost more than half of its value.

Now, two important things about this…

First, while crypto bears gleefully declared this reflected bitcoin’s “fad” status, crypto investors saw this as nothing more than standard volatility.

As we’ve noted before in the Digest, heightened volatility is the price of admission for crypto investors.

To illustrate, the below chart comes from Charlie Bilello. In the “% Decline” column, you’ll see how far bitcoin fell in various crashes over the last 11 years. And there are a lot of crashes.

But in the “% Return to New High” column, you’ll see the ensuing percentage return bitcoin tacked on in subsequent months on its way to a new high. And there are a lot of monster gains.

Though we’re not back to a fresh high, bitcoin has rallied 68% since its July low, as I write.

You should also know that Nasdaq.com’s research into bitcoin’s average volatility finds that its medium volatility (measured as 30-day standard deviations of daily log returns annualized) is between 50% and 100%.

Bottom-line – volatility is not the same as “risk.” Nor is it a sign of impending doom. It’s simply a characteristic of an asset – like a fingerprint.

When you expect exaggerated volatility and factor it into your investment plan, it’s a non-issue…though the financial media will do its best to make it an issue for you.

***The second point about bitcoin’s spring crash is that wise investors saw it as a buying opportunity

In fact, looking backwards, this crash followed a specific technical chart pattern.

In June – before bitcoin began rallying – Luke drew attention to this pattern. He wrote that it appeared to be a “Wyckoff” accumulation event.

Here he is to explain:

(A Wyckoff accumulation event is) a buying phase in which an asset’s price increases after selling off. The important takeaway is that the buying phase happens when individuals are selling out of fear and exhaustion, usually at a loss.

And guess who is happy to step in and buy at a discount? The institutions.

In Luke’s most recent issue, he provided the two charts below.

The top chart shows a hypothetical Wyckoff Accumulation pattern. The bottom chart shows bitcoin’s price action over recent months.

Notice any similarity?

Back to Luke:

The massive shakeout from May to June appears over.

It ended up looking much like a Wyckoff accumulation event. That’s good news because the market looks healthy and set to resume its upward trend.

So, bitcoin is appearing healthy and ready for more gains. That sets the stage for broader growth from the entire crypto/blockchain universe.

***Adoption is growing at home and abroad

Luke writes that the driving force behind blockchain’s disruption is its expanding presence around the world.

He cites a study by leading blockchain data analytics firm, Chainalysis. According to the study, worldwide adoption increased a staggering 880% year-over-year. That’s nearly 10X.

Back to Luke for specifics:

It’s worth noting where adoption is strongest.

Chainalysis ranked adoption in 154 countries around the world, and the top three were Vietnam, India, and Pakistan. The United States ranked eighth. The strongest adoption is in the emerging markets.

Another study tells a similar story. According to a report released by Crypto.com, a Hong Kong-based crypto exchange, the number of crypto users around the world grew to 221 million in June. That number doubled in just six months since the beginning of the year, and it increased 10% in one month from May to June.

No other industry is seeing this kind of explosive growth.

I’ll add that this widespread, global interest is especially encouraging as it shows that crypto’s overall health doesn’t depend on adoption by a single country, which could be impacted by prohibitive legislation.

***Here in the U.S., we could point toward any number of headlines illustrating bitcoin’s growth, but there’s an important story happening concerning altcoins

Last month, Coinbase CEO, Brian Armstrong, said he received Board approval to add $500 million in crypto assets to the balance sheet. The company would be investing 10% of future profits into crypto.

But here’s Luke with the critical detail:

The purchases will not be limited to Bitcoin.

This means Coinbase will look to diversify its balance sheet by adding other crypto assets like… you guessed it… altcoins.

We think this is a potential game changer for the altcoin space, as there will now be precedent for companies to invest in crypto assets other than Bitcoin and Ethereum, which is where much of the early money has gone.

So, which altcoins are receiving the bulk of these money-flows? And which appear most promising for investors today?

That brings us to the biggest returner in the Ultimate Crypto portfolio.

***Last month, we highlighted the altcoin, Cardano, which was soaring

The altcoin was racing higher because its founder had provided specifics about an upcoming “hard fork.” Without getting too technical, a hard fork is basically a radical change to the way a blockchain network works, resulting in “the old way” and “the new way” – like a fork.

Here’s Luke with why this is a big deal:

The final phase of the upgrade will enable Cardano to fully take on its main rival, Ethereum – the biggest smart contracts platform, with a market cap of around $396 billion versus Cardano’s $89 billion.

Ethereum has struggled with network congestion and higher transaction fees, so Cardano is well positioned to start taking market share immediately thanks to its higher throughput capability and cheaper gas fees.

In fact, Cardano’s plans to upend Ethereum are already well in motion…

Luke explains how it’s expected that Cardano will launch an ERC-20 token converter that will allow projects to seamlessly migrate assets from the Ethereum blockchain to the Cardano blockchain. This would be huge – like opening the floodgates to new Cardano adoption.

Luke points toward a decentralized artificial intelligence network called SingularityNET that has already made plans to migrate its native token, AGIX, from Ethereum to Cardano.

For reasons like this, Luke believes Cardano’s gains are far from done – even though Ultimate Crypto subscribers who bought according to the original recommendation are currently sitting on a 7,603% gain.

Here’s Luke describing what could be coming:

The average percentage move from the previous four consolidation phase tops to the next consolidation phase top is about 120%, so if a similar pattern plays out, the coin may climb toward $5 on its next leg higher.

As I write, Cardano trades at $3.02.

***Driving explosive gains like these from Cardano are technologies that are going to change our world

They’re ushering in this change through disintermediation.

Here’s Luke, explaining:

That’s a fancy word for “cutting out the middleman,” and this is a massive disruption.

Cryptos do serve to replace traditional fiat currencies, yes. But that is not their end goal – replacing the dollar, if you will, isn’t the “end game.”

They are a means to an end, and that end is economic disintermediation…

Altcoins are the smart application of blockchain technology.

They are projects, developed by a team of innovators on a decentralized network, geared to create breakthrough evolutions of today’s societal and economic systems that are freer, faster, and fairer.

Bottom-line, crypto adoption is picking up speed here in the U.S. and abroad. It’s not just bitcoin, it’s the entire sector. Best of all, we’re looking poised for another leg higher.

Here’s Luke’s final take:

So, sit back, buckle up, and enjoy the ride. You’re an early crypto investor. You know it’s going to be choppy at times. It’s going to be volatile at times. There are going to be some bloody days.

But you also know that you’ll survive those days, and that you’ll ultimately come out the other side with big gains.

Have a good evening,

Jeff Remsburg

Oil prices pushed past $70 for the first time in a month in late-day trading Thursday. The rally is breathing new life into the energy sector, which is up 2.5% at this writing. For the past quarter, energy stocks have been lagging the broader market, so shareholders are cheering the newfound strength. To celebrate the potential breakout, I’m highlighting the best three energy stocks to buy.

My process for finding today’s targets was simple. First, I sorted a list of the most liquid oil-related stocks by percentage change and focused on the biggest gainers. Second, I reviewed the chart of each to settle on the cleanest patterns. Despite today’s jump, many remain in downtrends and still need time to set up a trading opportunity properly.

To round out the trio, I included a sector fund to provide a diversified way to play.

• Energy Sector Select SPDR Fund (NYSEARCA:XLE)
• Conoco Phillips (NYSE:COP)
• Hess Corp (NYSE:HES)

After performing technical analysis on each chart, I’ll build out a smart options trade to profit.

Energy Stocks to Buy: Energy Sector Select SPDR Fund (XLE)

While XLE may not be ready for a directional trade due to the multiple overhead resistance zones, it does appear stable enough to warrant a cash flow play. I’m thinking naked puts. Thursday’s climb created a higher pivot low for the fund. As a bonus, we bounced right at the rising 200-day moving average. You’ll recall that higher pivots denote increasing demand.

The 50-day moving average and old resistance zones loom overhead and need to be taken out before the trend fully turns higher. In the meantime, I think today’s jump gives the green light to at least selling out-of-the-money puts.

The Trade: Sell the Oct $44 put for 60 cents.

Consider it a bet that XLE stays above $44 for the next 43 days. If it does, then you’ll pocket the max gain of $60 per contract.

Conoco Phillips (COP)

Conoco Phillips has the best-looking chart of all the largest players. It is, therefore, my stock of choice if you want a lower volatility play. My analysis for COP stock mirrors XLE. The higher pivot low just formed gives bulls a slight edge, but major resistance at the 50-day moving average and the cluster of swing highs near $57.50 require keeping our optimism in check.

You could wait for a breakout, then go directional with a call spread. Or, sell naked puts or put spreads now as a wager that prices will at least hold steady for the next few weeks. To give a bit of variety to today’s trade ideas, let’s build out a call spread. Be sure to wait until COP stock rises beyond $57.50 before pulling the trigger.

The Trade: Buy the Nov $57.50/$62.50 bull call for around $1.70.

Hess Corp (HES)

The final of today’s energy stocks provides the most volatile option. This can be both a boon and a curse, but I’m banking on it, working to our advantage if oil prices continue to rise. Thursday was a victory for HES stock in two ways. First, it pushed above its 20-day and 200-day moving averages. Second, it also breached the previous pivot high to signal a potential change in trend. Couple these with the trio of accumulation days that accompanied its mid-August upswing, and you could make the case that the bottom is in.

Let’s go with a bull put spread to bank on the juicier premiums available in HES options. The following bet will payout as Hess shares sit above $62.50 at expiration.

The Trade: Sell the Oct $62.50/$57.50 bull put spread for 50 cents.

A leader in the online sports gambling industry, DraftKings (NASDAQ:DKNG) is expanding its presence across the States and is expected to benefit from the upcoming football season. The company is making well-timed moves to build new offerings and achieve growth. It has successfully partnered with some of the top sports companies to offer a unique experience to the users. DKNG stock is up 22% over the month and is trading close to $60 today.

The stock recorded an all-time high of $74 and the current dip is a great buying opportunity. DraftKings reported strong Q2 numbers and is one of the most valuable companies in the industry with a valuation of $23.9 billion. With that in mind, let’s take a look at my bullish thesis of DKNG stock.

 

The Football Season Is Huge

There is nothing as big as football in the USA and I believe the National Football League (NFL) season will give it a strong boost. The company already has more than 1.1 million monthly unique players and it will be able to attract users during the football fiesta. The company stated that it does not expect any slowdown in the coming months which shows that it is ready to make the most of this season.

DraftKings entered into an agreement with Genius Sports to provide the complete range of official sportsbook data in addition to the complete suite of NFL products. 

In April, the company was chosen as one of the NFL’s tri-exclusive sports betting partners and this is when Genius Sports become the exclusive distributor of the official statistics and sports betting data feed. This makes DKNG one of the first operators that have a full Genius Sports NFL offering including the pre and in-game engagement.

This allows DKNG users to wager on the competitions, thus, enforcing the position of the business as the top provider of live betting products. 

DraftKings recently entered into an agreement with Simplebet, which is a tech company that allows micro-betting. As per the deal, Simplebet will offer its products to the users of DraftKings for NFL, Major League Baseball, and other college football contests. This deal will strengthen the offerings of DKNG and will make it an ideal choice for die-hard sports gamblers. 

Growing National Expansion

DraftKings is constantly expanding its presence across different states and it recently went live in Arizona, making it the 44th state to offer Daily Fantasy Sports. This is the perfect time to launch DraftKings in Arizona as the sports season is set to begin. It will be the most beneficial time for the company to acquire new users and grow its presence.

The company is offering a pre-registration bonus to attract users to the platform. 

DraftKings is heavily invested in expansion and as states legalize online betting, it is not wasting any time in expanding  across the country. 

The only states where betting is prohibited now are Hawaii, Alabama, Louisiana, Idaho, Montana, Iowa, Washington, and Nevada.

 

The Bottom Line On DKNG Stock

I am very bullish on DKNG stock and believe it is for the long term. The company has made some strong partnerships in the industry and is one of the top players today. As the lockdown ends and we resume normalcy, the company will gain from the sports season and it will take DKNG stock higher.

The fundamentals of the company are strong and its user growth is impressive. Cathie Wood bought $60 million worth of DKNG stock recently which has led the stock higher. 

I believe any dip in DKNG stock is a great buying opportunity. The company will report impressive revenue numbers in the coming quarter and it will benefit investors.

On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.