Author Topic: OSTK - Overstock.com  (Read 130936 times)

mwtorock

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Re: OSTK - Overstock.com
« Reply #410 on: June 12, 2019, 08:15:43 AM »
Good blog post today: https://fundamentalfinanceplaybook.com/2019/06/11/overstock-retail-value-and-risk-factors

I hadn't thought of the perspective that maybe Patrick Byrne sold his shares as a result of a margin call.

My biggest beef with Byrne is that he's basically "bet the farm" on Blockchain and Crypto. I do agree with him that Blockchain will have a major impact on many aspects of how things are done in the future, but I would never "go all in".

He's put himself and the Company in a vulnerable position.

the part i dont agree is the sale of retail business. it does not make sense to assign a 700m plus value to it unless there is evidence of demand in the market place. walmart and target have got their online business figured out, so they dont really need to buy a online furniture retailer. Smaller players might be interested, but 700m purchase would be a life or death decision for most of them. Take BBBY for example, maybe they can do a deal and get a lot of synergies, but 700m is half of their market cap, and their CEO just got fired in Q1. It is going to be very hard for any CEO of the small retailers to stick their neck out for OSTK.


Sportgamma

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Re: OSTK - Overstock.com
« Reply #411 on: June 12, 2019, 03:45:48 PM »
Good blog post today: https://fundamentalfinanceplaybook.com/2019/06/11/overstock-retail-value-and-risk-factors

I hadn't thought of the perspective that maybe Patrick Byrne sold his shares as a result of a margin call.

My biggest beef with Byrne is that he's basically "bet the farm" on Blockchain and Crypto. I do agree with him that Blockchain will have a major impact on many aspects of how things are done in the future, but I would never "go all in".

He's put himself and the Company in a vulnerable position.

the part i dont agree is the sale of retail business. it does not make sense to assign a 700m plus value to it unless there is evidence of demand in the market place. walmart and target have got their online business figured out, so they dont really need to buy a online furniture retailer. Smaller players might be interested, but 700m purchase would be a life or death decision for most of them. Take BBBY for example, maybe they can do a deal and get a lot of synergies, but 700m is half of their market cap, and their CEO just got fired in Q1. It is going to be very hard for any CEO of the small retailers to stick their neck out for OSTK.

I have a different view on this and I think Walmart is actually a great example.

In recent years, I think, there has been a fundamental change in how (big) retailers approach the transition to online. At some point, the retailers realized that online is fundamentally different than brick and mortar. Instead of trying to build the online version of their conventional business model, online offers the possibility of building fundamentally different sales funnels (plural, nb).

Walmart is, in my opinion, a pioneer in this new approach. This is what Walmart has acquired over the last years:
  • Jet.com in 2014
  • Hayneedle in 2016 (through jet.com, b.t.w. this is actually an online furniture retailer.... $350m-ish in annual rev)
  • ModCloth in 2017 (through jet.com)
  • Moosejaw in 2017
  • Bonobos in 2017
  • shoes.com in 2017
  • Fliipkart in 2018
  • Bare Necessities in 2018
  • Eloquii in 2018
  • Art.com in 2018

It's a pretty eclectic collection of assets that, aside from jet.com, don't seem to have much to do with the conventional Walmart business model. I think Walmart realized that they could take their super-efficient logistical network and value chains and plug all sorts of different "storefronts" into it, each with their own value proposition towards the clientele they serve.

In the conventional retail model, the game was to replicate the same store concept at different scales. In the online model, you find a store/business model/sales channel that is serving a particular niche and plug that into your backend. It's a totally different ball game.

So, I actually think that Overstock.com would be a pretty interesting option for Wallmart/jet.com as it would probably be cheaper to buy the demand that is flowing through Overstock than trying to build Hayneedle organically to surpas Overstock and even Wayfair.

I would also say that there are plenty of big retailers that have at least some overlap with the target audience of Overstock. Costco, TJX companies?

With overstock.com you get about 20m in website visits a month. QVC bought Zulily.com in 2015 for $2.4b. Zulily hit $1.6m in revenue in 2018. Currently, zulily.com gets about 22 million visits a month. QVC.com gets about 23m. Target.com, to take another example, gets about 105m visits a month, so overstock.com is about 20% of that. It would be about 6.5% of walmart.com. Jet.com gets about 3.1m.

From the standpoint of capturing demand, it's actually very hard to build what Overstock has built. Especially in terms of generating organic traffic through search engines. With a domain authority of 88, Overstock.com is probably in the top 1000 by that measure.
« Last Edit: June 12, 2019, 03:47:34 PM by Sportgamma »