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Overstock’s Difficult Year: Stock Down 72.8%

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Dec. 10 2018, Updated 2:06 p.m. ET

Why is the stock slipping?

Overstock (OSTK) had a disappointing run on the trading front this year. After a 265.1% gain in its stock price in 2017, the stock has lost 72.8% of its value in 2018 as of December 7.

The dismal performance of the company’s retail division has kept investors worried—along with the ebbing bitcoin craze. Overstock has increased its investments in marketing to drive revenue growth. Nonetheless, it continues to face challenges due to changes in search algorithms. Also, increases in promotional activity have dragged on the top line. Higher expenses are leading to muted profitability and bottom-line performance.

Bitcoin and other cryptocurrencies have always faced skepticism from regulatory authorities due to security concerns. Regulatory bodies around the globe have been cautioning investors against cryptocurrencies, and all these factors have hurt Overstock’s price movements in 2018.

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The blockchain move

A few days ago, the Wall Street Journal reported that CEO Patrick Byrne is looking to sell off its retail unit by the end of February. However, so far, no buyer has come up. For quite some time now, Overstock has been looking to sell its retail unit to fund its blockchain initiatives through tZERO and Medici Ventures.

In its report on November 23, the Wall Street Journal explained that in their three years existence of, tZERO and Medici Ventures are still losing millions of dollars a month. Byrne said, “I don’t care whether tZero is losing $2 million a month. We think we’ve got cold fusion on the blockchain side.” In the first three quarters of 2018, Medici Ventures lost $39 million. Overstock had invested $175 million in Medici Ventures.  

Analysts’ ratings for Overstock

All three analysts covering the stock have rated Overstock a “buy.” Analysts’ 12-month average target price of $93.50 reflects a 438.3% potential upside for OTSK as of December 7.

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