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Ladenburg Thalmann Raises Marathon Patent Price Target To $25

|Includes: ACTG, Marathon Patent Group, Inc. (MARA)

New research report from LadenBurg raises price target to $25. This is a first move of what I expect of all the analysts raising their targets based on greatly increased revenue and earnings guidance. Given the huge 3rd quarter all the analysts were way off and even the new guidance from Ladenburg is ultra conservative going forward and gives a lot of room to continue to raise their price targets as the Marathon continues to execute. Given Marathon is really the only IP company with earnings and Acacia when they earned money had PEs well above 50X it is pretty easy to see how conservative Ladenburg is being.

https://ladenburg.bluematrix.com/sellside/EmailDocViewer?encrypt=bb48c895-5fa3-482a-bbb3-f6b562bc80ac&mime=pdf&co=Ladenburg&id=AllUsers4LTS@ladenburg.com&source=mail

One-Time Stock Dividend - Marathon Patent has declared a one-time stockMedTech v. Stryker - Following a favorable injunctive ruling, issued beforeKey Litigations - Although the company's basic strategy is to manage a highly

achieve quick success from its acquired MedTech patent portfolio, underscores

the company's ability to identify and acquire key intellectual property, in our view.

We anticipate that the current patent portfolio will continue to produce increasing

revenues in future periods and believe the current share price is not reflective of the

expected predictability and longer-term growth. With the potential for a meaningful

settlement from Stryker, we are now estimating revenues of $22 million in 2014 and

$45 million in 2015, up from a previous estimate of $24 million for 2015. Additionally,

we are estimating non-GAAP profitability of $1.24 per share. As such, we are revising

our price target and believe that a more fair valuation should be based on a 20x

multiple on our new per share earnings estimate for calendar 2015. 20x our $1.24

per share estimate equates to a value of $24.80. As such, we are maintaining our

Buy rating and increasing our price target to $25.00.

Our Outlook - Marathon Patent's one-time stock dividend as well its ability to

dividend that will effectively double the number of outstanding common shares.

Holders of the company's common stock (as of the close of business December

15, 2014) will be given an additional share for each share owned. The new

share count will be approximately 18 million. We view the dividend, in light of

strong 3Q performance, as an effective means to increase liquidity in the shares

and potentially enable a transition of ownership composition toward longer-term

institutional investors. The dividend payable date is December 22, 2014.

 

Düsseldorf District Court in its patent infringement litigation in Germany against

Stryker GMBH & Co, a subsidiary of Stryker Corp., (SYK, $94.60, Not Rated),

MARA's MedTech GMBH subsidiary has been granted an injunction and is now

enforcing that injunction involving all of Stryker's infringing products related to

European patents EP 1938 765 B1 and EP 1 104 260 B2. The ruling provides

MedTech with both injunctive relief and damages. The ruling also provides MARA

with access to information on the distribution chain with respect to Stryker's medical

devices for kyphoplasty related surgery in Germany. However, due to the bifurcated

system in Germany, ongoing patent validity proceedings with respect to these

patents are being tried in a different court although in the Düsseldorf District Court

ruling Stryker's request for a stay of infringement proceedings was rejected. Based

on the recent ruling we expect the validity of the patents could be upheld by other

courts and we anticipate a settlement in the range of $10 to $30 million.

 

Investment Highlights

diversified patent portfolio and avoid high profile litigation, Marathon has acquired

several patent groupings that have the potential for multi-seven figure dollar

licensing awards. Included in this group are the Signal IP patents (automotive), the

Clouding patents (networking) and the Dynamic Advances patents (natural language

processing). We note that in addition to the company's recent success against

Styrker, the MedTech GMBH patents are being litigated with other defendants in

Germany and here in the U.S. Additionally, we note that MARA already has one

settlement in place related to the MedTech patents with Johnson & Johnson (JNJ,

$108.52, Not Rated) for roughly $450,000 per quarter.

Disclosure: The author is long MARA.