The stock market has been hammered in recent weeks, but the once-mighty Overstock.com (NASDAQ:OSTK) has been hit harder than most. From a peak of $84 earlier this year, OSTK stock has dropped to around $20.75. Yet the company still boasts some attractive fundamentals. Has the decline of OSTK stock created a buying opportunity?
Many investors have turned against the online retailer; in fact, it is one of the ten most shorted stocks on the NASDAQ market. But after considering the company’s intrinsic assets, the price of OSTK stock seems reasonable.
When the company first appeared on the scene almost 20 years ago, it sold surplus and returned goods on an online e-commerce marketplace, liquidating the inventories of a variety of failed dot-com companies at very cheap prices.
Overstock continues to sell home decor, furniture, bedding, and a great deal of other closeout merchandise. But it has expanded its operations and now also sells new stuff, some of which was manufactured specifically for the company.
Crypto Profits
Three years ago, OSTK made news when it became the first major retailer to start accepting bitcoin as payment for its goods. The company has stayed involved with the cryptocurrency world by creating a blockchain subsidiary which is supposed to build a SEC-regulated alternative trading system. OSTK stock spiked earlier this year after a Chinese equity firm agreed to invest in this effort, dubbed Medici Ventures.
The latest news on that front is that crypto-social network Minds will get a $6 million investment from Medici. Additionally, OSTK founder and CEO Patrick M. Byrne will become a member of Minds’ board of directors.
“There has been increasing excitement in recent years over the power of blockchain technology to liberate individuals and organizations,” Byrne declared. “Minds’ work employing blockchain technology as a social media application is the next great innovation toward mainstream use of this world-changing technology.”
Bottom Line on OSTK Stock
The company’s major assets are its well-established brand as one of the country’s best-known online retailers and its expanding role in cryptocurrency. So why is OSTK stock down more than 60% since January?
Since OSTK did not generate a profit in the second quarter and does not pay a dividend, Wall Street’s abandonment of OSTK stock is understandable. But now the pendulum has swung too far the other way, with OSTK close to the bottom of its 52-week trading range.
Much depends on the broader market. If the Nasdaq rebounds from its sharp decline of recent weeks, the momentum will likely carry OSTK back to the middle of its 52-week range. So the decline of OSTK stock can be seen as a buying opportunity, but not for the faint of heart.
As of this writing, the author did not own any of the stocks mentioned in this article.
