Maxim Projects Nearly 200% Upside Potential For Overstock, Names Blockchain, Retail As Drivers

Overstock.com Inc (NASDAQ: OSTK) is one of the beneficiaries of the evolution of blockchain technology, making it an attractive equity, according to Maxim Group. 

The Analyst

Analyst Allen Klee assumed coverage of the shares of Overstock.com with a Buy rating and $75 price target.

The Thesis

The new initiatives adopted by Overstock.com, including disciplined ad spend and a focus on the profitable home goods market, are likely to lead to a shift to profitability in the retail segment, Klee said in a Monday note. (See his track record here.)

"OSTK is considering selling its retail segment, which we estimate could be sold at 1x sales or over twice the current market cap of OSTK, once the company returns to profitability," the analyst said.

The market is underestimating the changes and potential upside from the sale of the segment, Klee said. 

Overstock's cryptocurrency tZERO offers "a large opportunity to create a disruptive financial exchange," he said. The crypto was launched through an initial coin offering in December. 

Maxim forecast losses per share from 2018-2020 before Overstock becomes profitable in 2021 due to contributions from retail and blockchain.

Overstock is expected to turn cash flow positive in 2020 as a cash-rich balance sheet and more than $400 million in expected contributions support growth initiatives, Klee said. 

The stock trades at 0.3 times its sales estimate for 2019 compared to the peer-group average of 2.4 times, and is therefore attractively valued, the analyst said. 

The Price Action

Shares of Overstock.com have plunged about 60 percent year-to-date. 

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