Despite Overstock's Stalled Common Offering, DA Davidson Remains Bullish

Overstock.com Inc OSTK announced a public offering of its common stock  March 26, but reports the company canceled its offering could "add fuel to the fire of the detractors," according to D.A. Davidson.

The Analyst

Analyst Tom Forte maintains a Buy rating on Overstock's stock with an unchanged $100 price target.

The Thesis

Despite concerning headlines, the bullish case for Overstock hasn't changed, Forte said in a research report. (See the analyst's track record here.) 

The company boasts two significant assets, the analyst said:

• The legacy, home e-commerce business, which could be worth $48 per share in a sale to a potential strategic buyer.
• The Medici Ventures subsidiary, which could be worth $52 per share.

Overstock's legacy business is expected to see a "material change" in its first quarter with a sales growth of 5 percent compared to a 13.3-percent sales decline in the fourth quarter, Forte said. The reversal is attributed to management's strategy of ramping its investment spend to "pursue the traditional e-commerce model of investing for growth," the analyst said. 

Overstock's Medici Ventures subsidiary includes investments in 12 companies that are in some way leveraged to blockchain technologies, Forte said. If the subsidiary is successful in completing a $250 million initial coin offering, it could mark another "significant catalyst" for the stock, he said. 

Price Action

Shares of Overstock were trading lower by more than 8 percent at the time of publication Monday. 

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