4 Potential Overstock Catalysts That Make DA Davidson Bullish

Overstock.com Inc OSTK has had a rough go of it so far in 2018, but one analyst said investors should remain patient for positive catalysts on the horizon.

The Analyst

D.A. Davidson analyst Tom Forte in a March 16 note reiterated a Buy rating and lowered the price target for Overstock from $110 to $100.

The Thesis

Overstock's earnings report last week was certainly disappointing for bulls, but after selling off by more than 25 percent year-to-date, the online retailer is still a solid value, Forte said in a note. (See the analyst's track record here.)

The market is unlikely to react kindly to management’s new focus on investing heavily in the company’s e-commerce business,the analyst said, adding that the plan is likely to focus on market share rather than profits.

Forte values the legacy e-commerce business at $48 per share, slightly less than the $52-per-share valuation he gives Medici Ventures.

“We continue to have a high degree of confidence in our base case outcome," which includes the sale of Overstock's home e-commerce business and value creation from the company's Medici Ventures portfolio, which leverages blockchain technology to "varying degrees," Forte said.  

The analyst named four bullish catalysts for Overstock in the next 12 months:

• A sale of its e-commerce business.
• The completion of the tZERO ICO.
• The sale of a minority interest in Tzero following the ICO.
• The Medici Ventures portfolio being fully valued in the market.

Costco Wholesale Corporation COST, Target Corporation TGT and TJX Companies Inc TJX are the three most likely buyers of the e-commerce business, Forte said. 

Price Action

Overstock shares were up 4.7 percent Monday afternoon, but the stock remains down by 36.9 percent in the past three months.

Related Links:

Why Overstock Is The Perfect Storm For This Market

Analyst Stays Bullish On Overstock's tZERO Coin Offering Despite Regulatory Risk