Good afternoon everyone,
I wanted to take a quick minute to highlight why OSTK is one of the best plays in the market currently and could see a massive move to over 100% within the next couple of months. OSTK is currently trading at 52.53 and has a 52w high of 112.30.
We all know who OSTK is and what they do in the online retail market. They are ranked as the 4th largest in online home furnishing brands behind Amazon, Walmart, & Wayfair.
What makes OSTK so interesting is that it is trading at 10x TEV/EBITA with a P/E of 21. Amazon trades at a TEV/EBITA of 22 & a P/E of 82, Wayfair trades at TEV/EBITA of 55 & a P/E that just can’t be calculated.
Now I’m not trying to compare OSTK to Amazon because AMZN has their software side of the business that is a behemoth and they are just a much better company.
What I find interesting about OSTK is that their market cap is $2.29 Billion and they do sales of $2.8 Billion. They have consistent Gross Margins at around 20-22% and have been profitable for the past 2 years.
Looking at their balance sheet, they have $512 million in cash just sitting there with very little debt. They are producing a 6% FCF yield in a growing market.
Some might say that they peaked during the pandemic, and that might be true, but consumers are not going to shy away from ordering online.
So just for OSTK’s main part of the business alone, we can see that they are undervalued compared to their competitors in the market. I would say that OSTK by itself is worthy of anywhere from $100-120/share.
But this isn’t even the highlight of what OSTK is doing. They also own 91% of Medici Ventures which owns tZero, bitt, and a dozen other companies revolving around crypto and blockchain technology.
tZERO is a leading liquidity platform for private securities and digital assets. We offer institutional-grade solutions for private companies looking to digitize their capital table and trade on a regulated platform.
This isnt’ bitcoin or etherium that we are talking about. We are talking about a regulated platform for private businesses to secure funding digitally instead of having to IPO. To put it simply, they are allowing anyone and everyone to invest into companies. Not just institution and hedge funds. tZero is also allowing the buying and selling of Crypto on this platform. Think of tZero as the company Robinhood thought they were prior to the GME & AMC catastrophe.
Some the highlights for tZero in 2021:
+220% growth in users in digital secruity trading
+126% users in cyrptocurrency trading
+569% in Total $ value added within Crypto trading
+44% digital revenue
+26% Free Cashflow
With this massive growth in tZero and the acceptance and adoption of cryptocurrencies becoming mainstream, an over $1b valuation is not out of the question when comparing to companies like COIN.
tZero has also said that they are looking to raise capital in the near future to the tune of $100 million. If they decide to IPA or SPAC then OSTK will be getting a nice return on their investment here.
I like to think of tZero and Medici Ventures as a free built in call option on the underlying stock for OSTK.
Some bearish cases for the stock:
Tough competition against Amazon, Wayfair and Walmart
Revenue decreased slightly in Q3
High Beta of 4.09
My prediction:
Short term I think the bottom is in place around $50 and we trade back higher to $120. I think we the amount of cash the company has on hand and not much to reinvest in, they could potentially buy back some stock.
Within the next 12-18 months I think the Medici Ventures takes tZero public and generates increased investment profits for OSTK and the stock ends up trading around $160-180
3-5 years I think this could be a real 10x play if you have the patience to hold that long. I think the upcoming earnings in February will give us an idea of how they plan to manage Medici Ventures.
My position currently is 400 shares @ $54 avg price. I’ll continue to buy dips if it drops under $50. After earnings, I’ll gauge sentiment and see if I want to pick up any options. Options right now are a little elevated compared to historical prices.
Thanks!