There are few bigger battleground stocks in the market right now than Overstock.com (OSTK). The stock used to be a sleepy second-tier e-commerce provider, struggling to drive profits amid intense online competition. Between the beginning of 2010 and the beginning of 2017, OSTK rose just 30% total, an annual return of less than 4%.
The story has changed markedly – and so has the stock. OSTK has quadrupled in just the last six months. The rise in bitcoin, and increasing optimism toward blockchain technology more broadly, has focused investor attention on Overstock’s tZERO unit. Overstock is even considering selling the legacy e-commerce business in order to focus on the tZERO ICO and its opportunities going forward.
The enthusiasm toward OSTK is starting to fade, as the stock has pulled back 25% from a high just shy of $90 reached earlier this month. And I argued last week that the stock looked overvalued to my eye – if an exceedingly dangerous short.
But this is a real story, unlike the hype trains at companies like Riot Blockchain (RIOT) and Eastman Kodak Company (KODK). And on the Q3 conference call CEO Patrick Byrne made an interesting, and compelling, argument about the value of the operating business, claiming that Overstock’s thin ~1% margins actually were a huge success.
Given the willingness of rivals like Wayfair (W) to lose money on every sale, Byrne said Overstock’s results should be lauded, not criticized. And the obvious implication is that once those rivals inevitably burn through capital, OSTK should thrive.
Personally, I’m still skeptical about OSTK’s valuation — but if the company is right in its blockchain move and/or can get a good price for the e-commerce business, the recent pullback may be a buying opportunity.
