OSTK - Overstock.com

[Parsad]

SEC closes 2009 OSTK investigation.  Wonder what else Sam is going to come up with now!  Cheers!

 

http://finance.yahoo.com/news/overstock-com-announces-close-sec-130000147.html

[alertmeipp]

With OSTK near multiple years low?

[lessthaniv]

SEC closes 2009 OSTK investigation.  Wonder what else Sam is going to come up with now!  Cheers!

 

http://finance.yahoo.com/news/overstock-com-announces-close-sec-130000147.html

 

Differences between 2011 and 2012:

 

1) About $8M in excess legal expense due to patent troll lawsuits.

2) About $8.5M in excess Tech related labour costs that has now been reduced in Jan 2012.

3) Contribution Margin was hurt due to Google penalties and branding issues. I look for a potential 1% improvement. On $1B in sales that's another $10M.

4) They paid off $35M in convertible notes, $25M in Master lease agreements, and borrowed $17M from the LOC to help cover this leaving them with $97M in cash. So, CFF where negatively impacted by  ($43M) due to extinguishing debt.

 

If they can get their top line growth back - that's gravy.

 

Also, in the last 3 years their working capital requirements have been reduced by $65M and now are ($14M). Sam and his calloused fingered friends suggest OSTK is on the brink of bankruptcy because the working capital is negative. They go on to say that OSTK will have to dilute by raising capital. On the contrary this shows the efficiency of OSTK's model. A consumer buys a rug. The credit card gets charged and collected quickly. The rug gets shipped (customer is happy) and roughly 30 later OSTK pays out the supplier. The fact that they are collecting cash much faster then they need to pay out suppliers is a good thing. Although Sam Antar, in true Chicken Little fashion, believes the world is coming to an end.

 

OSTK pays out its suppliers in 30 days. Amazon pays out its suppliers in 90 days. In other words, as OSTK gains scale we could see OSTK negotiate longer payable periods and perhaps continue to reduce their working capital needs.

 

The invested capital is low (sets up a great ROIC) and free cash flow is set to continue to grow.  Ask Mr. B over at Amazon what  the best way to measure this business is!

 

;D

 

 

 

[CONeal]

Been looking at the company for the past few months and while the company is cheap decided to pass for the following reasons.

 

In my view Patrick's extracurricular activities (the lawsuit) has me wondering what is more important to him.  Building a top notch company or go into raving rants about Darth Vador during conference calls.  While he has a point about the lawsuit, His distractors are actually winning bc they have got him to focus his attention on things that are not related to building the business.  With the appeal, it doesn't seem like this is changing anytime soon nor the legal fees. 

 

The most important reason for staying away though is sales tax on purchases over the Internet.  This will probably cause a major shift in consumer behavior since most purchases are done to avoid the tax.  If a bill is not passed pretty soon allowing for a federal tax to be charged, some states will prusue it on their own.  If this occurs how will it affect businesses and also the valuations paid in takeovers.

 

Feel free to point out where I've fallen off the wagon but these are the two sticking points that has me staying away from investing in Patrick and Overstock.

[compoundinglife]

 

The most important reason for staying away though is sales tax on purchases over the Internet.  This will probably cause a major shift in consumer behavior since most purchases are done to avoid the tax.  If a bill is not passed pretty soon allowing for a federal tax to be charged, some states will prusue it on their own.  If this occurs how will it affect businesses and also the valuations paid in takeovers.

 

 

You think there will be a shift in U.S. Internet consumer behavior or specifically in OSTK customer behavior? Also curious what data you used to come to the conclusion that sales tax avoidance is the driver.

 

[CONeal]

 

The most important reason for staying away though is sales tax on purchases over the Internet.  This will probably cause a major shift in consumer behavior since most purchases are done to avoid the tax.  If a bill is not passed pretty soon allowing for a federal tax to be charged, some states will prusue it on their own.  If this occurs how will it affect businesses and also the valuations paid in takeovers.

 

 

You think there will be a shift in U.S. Internet consumer behavior or specifically in OSTK customer behavior? Also curious what data you used to come to the conclusion that sales tax avoidance is the driver.

 

I think a shift is coming for the Internet in general if/when this goes into affect, Calif starts charging Amazon in Sept if Federal tax is not passed by then. 

 

I can't provide hard data, just from watching friends buying habits how they preach buying stuff online to avoid the tax.

[Guest valueInv]

 

The most important reason for staying away though is sales tax on purchases over the Internet.  This will probably cause a major shift in consumer behavior since most purchases are done to avoid the tax.  If a bill is not passed pretty soon allowing for a federal tax to be charged, some states will prusue it on their own.  If this occurs how will it affect businesses and also the valuations paid in takeovers.

 

 

You think there will be a shift in U.S. Internet consumer behavior or specifically in OSTK customer behavior? Also curious what data you used to come to the conclusion that sales tax avoidance is the driver.

 

I think a shift is coming for the Internet in general if/when this goes into affect, Calif starts charging Amazon in Sept if Federal tax is not passed by then. 

 

I can't provide hard data, just from watching friends buying habits how they preach buying stuff online to avoid the tax.

 

There are a lot of factors driving online buying other than sales tax avoidance:

- Convenience:  You don't have to drive an hour each way. find parking, lose half your day. etc

- Selection and long tail: There are a lot of items that you can find online that you cannot find locally. Where can you find a store with Amazon's selection?

- Information: You can research and compare items online in ways that are not simply possible offline.

 

I don't expect buyer behavior to change much but margins may narrow a bit.

 

[CONeal]

ValueInv,

 

Your right there are convience and other factors at play also.  I'm not saying that online purchases will disappear althougher.  I'm saying the 7% discount (sales tax) that factors into decisions to buy online will be gone.  This drives a certain % of online sales. (What % I don't know)

 

Convience works both ways.  When you have to sign for a package that was purchased online its also a hassle for timing the FedEx guy and getting off work.

[beerbaron]

Convience works both ways.  When you have to sign for a package that was purchased online its also a hassle for timing the FedEx guy and getting off work.

 

Just ship to your work instead. It's the most wonderfull thing in the world to break a crappy day by the good feeling of receiving your new toy :)

 

BeerBaron

[Guest hellsten]

Here's a link to the latest attack on Overstock and Patrick Byrne, this time by an amateur boxer and bouncer:

http://dagblog.com/business/overstockcom-ceo-patrick-byrne-palling-around-terrorists-13567

 

The article is not interesting in itself, but it led me to this article from 2005:

http://money.cnn.com/magazines/fortune/fortune_archive/2005/11/14/8360711/index.htm

 

Interesting to see that no other than Michael Burry and Scion Capital were interested in Overstock. In June 30, 2005, Michael Burry owned 6.95% of Overstock, or almost 19 million shares:

http://www.sec.gov/Archives/edgar/data/1130713/000092299605000099/scion_13g-overstock.htm

 

In September 2007 he held only 250 000 shares:

http://www.sec.gov/Archives/edgar/data/1182422/000108514607001105/scio3q07.txt

 

Would be interesting to hear Michael Burry's thoughts about Overstock then, and now.

[Eric50]

YOY unique visitors down 9.6% in March....

 

http://siteanalytics.compete.com/overstock.com/

[Guest Hester]

http://siteanalytics.compete.com/zappos.com/

http://siteanalytics.compete.com/amazon.com/

 

Zappos unique visitors up over 19% YOY, Amazon up 15% YOY.

[stahleyp]

Doesn't that include the deals OSTK had with living social and things too?

[Parsad]

1st Q report out:

 

http://finance.yahoo.com/news/overstock-com-returns-1st-quarter-141104770.html

 

Good progress on cost cutting.  As I said before...absolutely no reason why this company cannot be profitable on an annual basis. 

 

Need to push fulfillment business, rather than direct business.  With continued cost cutting, improved merchandising and marketing, revenues and profits should increase.  Cheers!

[lessthaniv]

1st Q report out:

 

http://finance.yahoo.com/news/overstock-com-returns-1st-quarter-141104770.html

 

Good progress on cost cutting.  As I said before...absolutely no reason why this company cannot be profitable on an annual basis. 

 

Need to push fulfillment business, rather than direct business.  With continued cost cutting, improved merchandising and marketing, revenues and profits should increase.  Cheers!

 

;D

[Mephistopheles]

1st Q report out:

 

http://finance.yahoo.com/news/overstock-com-returns-1st-quarter-141104770.html

 

Good progress on cost cutting.  As I said before...absolutely no reason why this company cannot be profitable on an annual basis. 

 

Need to push fulfillment business, rather than direct business.  With continued cost cutting, improved merchandising and marketing, revenues and profits should increase.  Cheers!

 

Agree on the cost cutting. Was disappointed that they didn't talk about buying back stock like they did in the last CC. Overall I was pleased.

[Mephistopheles]

I thought I'd share with you all this web analytics site I came across that is much better, in my opinion, than Compete.com.

 

http://www.alexa.com/

[manualofideas]

Interview with Glenn Surowiec on Overstock - enjoy!

 

http://greatinvestors.tv/video/what-the-market-is-missing-in-overstock-ostk-and-why-it-is-t.html

 

[lessthaniv]

Great stuff MOI, thanks for sharing !!

[OracleofCarolina]

http://m.seekingalpha.com/article/654111-overstock-com-oversold?source=yahoo

 

Bullish article from SA

[Granitepost]

OSTK 2012 Q2 earnings look encouraging.  It is nice to see a profit, even though it is not large.

Revenue: $239.5M vs. $235.0M (2% increase);

Gross margin: 18.0% vs. 16.9% (110 basis point increase);

Gross profit: $43.2M vs. $39.8M (8.5% increase);

Sales and marketing expense: $13.5M vs. $13.7M (1% decrease);

Net income (loss): $470,000 vs. $(7.8)M ($8.3M increase); and

Diluted EPS: $0.02/share vs. $(0.34)/share ($0.36 increase).

 

[Parsad]

OSTK 2012 Q2 earnings look encouraging.  It is nice to see a profit, even though it is not large.

Revenue: $239.5M vs. $235.0M (2% increase);

Gross margin: 18.0% vs. 16.9% (110 basis point increase);

Gross profit: $43.2M vs. $39.8M (8.5% increase);

Sales and marketing expense: $13.5M vs. $13.7M (1% decrease);

Net income (loss): $470,000 vs. $(7.8)M ($8.3M increase); and

Diluted EPS: $0.02/share vs. $(0.34)/share ($0.36 increase).

 

Hey, I said this business should be profitable quarter in and quarter out.  I spoke to Sam Mitchell about this in Toronto, and I think the Overstock team, as well as their board, is focused on doing just that.  Sam said 2012 was their year to prove it and so far so good.  Usually the 2nd quarter is a tough quarter and they lose money in the 3rd quarter as well, as they ramp up for the big 4th quarter, but if they have a profitable 3rd quarter as I expect, then they should finish 2012 with excellent results.  Cheers!

[premfan]

I  have been thinking about starting a small position for months but cant make myself to pull the trigger due to managements inability to control SG & A. Comparing the numbers with amazon there is no reason why overstock cant earn sustainable profits.  I fear that management will keep ramping up the SG & A percent to revenue each year. The company is growing revenue at an impressive rate for the last decade. Management needs to have some sort of normalized SG & A percent to revenue like amazon does.  Amazon is 11-13 percent SG & A since 06.  Overstock since 06 is 9-17 percent SG and A compared to revenue. Thats a massive spread due to horrible management. I love there business but new management is definitely needed. I would like to understand this story better. Overstock experts any insight?

[Parsad]

I  have been thinking about starting a small position for months but cant make myself to pull the trigger due to managements inability to control SG & A. Comparing the numbers with amazon there is no reason why overstock cant earn sustainable profits.  I fear that management will keep ramping up the SG & A percent to revenue each year. The company is growing revenue at an impressive rate for the last decade. Management needs to have some sort of normalized SG & A percent to revenue like amazon does.  Amazon is 11-13 percent SG & A since 06.  Overstock since 06 is 9-17 percent SG and A compared to revenue. Thats a massive spread due to horrible management. I love there business but new management is definitely needed. I would like to understand this story better. Overstock experts any insight?

 

I think that Steve Chestnut and Jonathan Johnson are working to help keep things more orderly.  Along with the board playing a more intricate role...such as not allowing the buybacks just yet.  As long as they can keep Patrick focused, Overstock will do fine.  Cheers!

[link01]

I  have been thinking about starting a small position for months but cant make myself to pull the trigger due to managements inability to control SG & A. Comparing the numbers with amazon there is no reason why overstock cant earn sustainable profits.  I fear that management will keep ramping up the SG & A percent to revenue each year. The company is growing revenue at an impressive rate for the last decade. Management needs to have some sort of normalized SG & A percent to revenue like amazon does.  Amazon is 11-13 percent SG & A since 06.  Overstock since 06 is 9-17 percent SG and A compared to revenue. Thats a massive spread due to horrible management. I love there business but new management is definitely needed. I would like to understand this story better. Overstock experts any insight?

 

yea, i go way back with overstock. as more of a buy & holder than a trader i've got what can be charitably called a checkered history with ostk as an investment over the yrs.

 

patrick may be a dr of philosopy with a major in the taoist/buddhist disciplines but at heart he's a very emotional, gut-feel, shoot from the hip kind of guy. when he's had a good qtr or 2 of favorable comps & the wind at his back he tends to go off the rails & swing for the fences, eschewing the smaller, more measured incremental gains that take deeper root in more fertile ground & sow the seeds for future solid compounded growth.

that said, i seem to have a soft spot in my heart (as well in my head!) for the the good dr & ostk, and am a perennial fan, always richer in hope & poorer in  pocket for my foibles.