Is Overstock an overvalued stock?
In a recent column featured in Forbes, the thinking goes that online retail has managed to disrupt the lives of many a brick-and-mortar retailer. There’s another existential threat here, as online retailers must grapple with other online retailers. The 800-pound gorilla in the space is Amazon, of course, with impressive reach and scale. The magazine, via columnist David Trainer, said that Overstock took its place among last month’s most dangerous stocks and could in fact be the “next victim of the retail market.”
Some numbers belie the pressures at hand. The net after tax profits of the firm have declined to $2 million as of the latest full year, in 2015, down from $18 million in 2013 — and this far in the year the bottom line has been decidedly negative. That comes even as Overstock’s top line has been growing, indicating operational pressures. That negative profitability also means a tougher road to hoe in a price war.
In the meantime, according to Trainer, Overstock has been trying to lure customers online from brick-and-mortar retailers with salvos of coupons and customer rewards programs. Costs are rising as the firm tries to acquire customers from $12.52 a few years ago to a more recent $18.36. Movements into blockchain and bitcoin are side bets separate from the main retailing business, contend Trainer, with a software segment that may not be enough to compensate for that core struggle. And, he added, don’t bet on a takeout to lift the share price, as Walmart may not want to make more acquisitions to bolster its eCommerce ops by buying up a stock that has already run up 20 percent this year to date.