In a show of confidence, entrepreneur Marcus Lemonis, recently appointed to the board of directors at online home goods retailer Overstock.com (NASDAQ:OSTK) bought a significant number of shares of OSTK stock. Across two separate transactions, Lemonis acquired 64,800 shares, according to data from GuruFocus. Despite the encouraging sign, concerns still ring loudly over the business.
According to Fintel, going back to October 2005, Overstock insiders initiated 35 acquisitive transactions. Aside from the two Lemonis transactions — which have a transaction date of Oct. 4 and Oct. 5 — the most recent insider buys occurred in the back half of August. Coincidentally, these buys also occurred on two separate transactions.
Of course, the Lemonis buys stand out thanks in large part to his vast business acumen. From Overstock’s press release regarding his directorship appointment, Lemonis currently serves as Camping World (NYSE:CWH) chairman and CEO. He’s also well known for improving operations at small businesses thanks to CNBC’s television program The Profit.
Also, the very fact that Lemonis acquired shares of OSTK is notable. During the previously mentioned timeframe, insiders sold OSTK across 236 transactions. To be fair, insider sells occur for various reasons, including mundane ones such as tax considerations. Still, the acquisitions are notable for another reason.
OSTK Stock Must Still Climb a Credibility Wall
On paper, the red ink splattered on OSTK stock isn’t particularly unexpected. With stubbornly high inflation and rising borrowing costs, many households have had to cut back on discretionary purchases. Also, the underperformance — down roughly 8% on a year-to-date basis — doesn’t seem that bad.
However, the recent negative acceleration warrants serious concern. Since hitting a 52-week closing high on Aug. 2, OSTK stock succumbed to a decisively negative trendline. Even inclusive of the Friday pop, shares find themselves down about 17% in the trailing one-month period.
To be sure, Lemonis’ acquisition of OSTK stock represents a much-needed confidence boost. Nevertheless, Overstock faces significant credibility concerns amid the shifting retail landscape. One month ago, management revealed that since buying the intellectual-property assets of Bed Bath & Beyond and rebranding Overstock in the U.S. under the former big-box retailer’s banner, revenue has fallen significantly.
One potential positive is that since August of this year, major speculators have bought call options at various strike prices expiring on Dec. 15, according to Fintel’s options flow screener. This screener focuses exclusively on big block trades, implying activity among institutional investors.
Still, for options expiring on Jan. 19, 2024, the arena is much more contested, with bought puts and sold calls implying a broader lack of confidence.
Why It Matters
According to data from TipRanks, analysts peg OSTK stock a consensus moderate buy. This assessment breaks down as two buys, five holds and zero sell ratings. On average, the price target lands at $39.67, implying nearly 127% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
