Quiz Time: Which Nasdaq-Listed Ecommerce Stock Has Become The Clear Favorite Among Tech Bulls This Year? Amazon? Shopify? Alibaba?
No no no.
The answer is Utah-based Overstock.com, which is up more than 1,500% year-to-date. What's more impressive is that the stock has risen roughly 2,000% since hitting lows in mid-March. It's part of the powerful Russell Microcap Index, which has outperformed the best of the best in big tech – the Nasdaq 100 – for the past few weeks. Overstock's rocket rise has generated random returns for many investors, with one notable exception: the man who started the company more than 20 years ago.
Overstock was down 1.7% in early trading Tuesday, the day after Piper Sandler stock analyst Peter Keith initiated coverage of Overstock (ticker symbol: OSTK) with an "overweight" rating. This announced the new management team and the company's focus on home furnishings, which should help boost sales this year to $ 2.9 billion, more than doubling last year's sales.
Unprofitable a year ago, Overstock is expected to make a decent profit this year. Keith estimates earnings per share for the full year at $ 0.47.
"Seismic forces are at work that have dramatically improved the sales and profitability prospects for Overstock (OSTK) into the future," Keith wrote in a research report to investors.
And like with other e-commerce companies, COVID-19 is the big catalyst.
Stay-at-home stocks continue to dominate the broader market rally as investors bet that the digital economy will drive the broader economy out of recession. It's the proverbial trade between clicks and bricks. But even among this group of high-flying tech stocks, there are distinct distinctive features, as the following chart shows.
Overstock's share price has risen six times as much as Wayfair's, which is itself doing a hell of a good run. Further down the list, Amazon is up just 72%, an accomplishment that makes Amazon cops very happy. But even they must be envious of excess stocks.
It should come as no surprise that an online retailer is at a record high in this phase of the technology-driven stock rally. But seasoned Nasdaq watchers may recall how unlikely this is for Overstock.com, which has clashed with investors over the years.
It was almost exactly a year ago that Patrick Byrne, Founder and CEO of Overstock, abruptly resigned. Days earlier, he had admitted to being questioned in a federal investigation into the 2016 presidential election, and attributed the whole matter to the "deep state". That revelation shocked investors, who crashed stocks by more than a third in two days.
Within weeks, Byrne had dumped all of his shares in Overstock.com, public filings showed. This resulted in him missing the rally of his life that spring and summer.
According to government records, he sold 4,790,459 shares in September, a stake that would have been worth approximately $ 566 million based on today's share price.
It is possible that Byrne has since bought back into the stock, although regulatory records do not indicate such purchases. Overstock itself is unaware of such purchases from its estranged founder. "Overstock does not have information on every single outside investor who owns our shares, but we have no reason to believe that Dr. Byrne has bought any shares as he has not had any stake in the company since he retired," said one Company spokesman to Fortune.
But don't feel bad for Byrne. Byrne raised approximately $ 90 million from the stock sale. Last fall, he wrote an open letter to employees explaining that he was putting the $ 90 million in gold and silver (the appeal of the two precious metals: Both are stored outside the US and are therefore “even more out of reach the deep "state", he wrote) as well as in cryptocurrencies.
Gold-silver beetles have an excellent pandemic, as do crypto bulls.
Unfortunately, few assets have had the six-month maturity that Overstock stocks enjoy.
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