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Bloodbath Redux: OSTK

At catablast.com, we don't mess around.

While most traders were hitting the slopes or sipping on their 5th egg nog, we were deconstructing interview playbacks and unearthing the skinny on Overstock.com (OSTK), the beleaguered online retailer on which we now have a $20 price target.

Here's the alert memo we put out late Friday night:

"...The writing is on the wall: Overstock's problem isn't rampant short selling -- it's mismanagement. Everything from implementation problems to bloated marketing expenses points to management's inefficacy. And that's just the tip of the iceberg. OSTK's receivables turnover ratio leaves much to be desired -- its ratio is lower than its peers, meaning Overstock's collection policy needs some fine-tuning. Even though Overstock's revenues are climbing (but margins off their 2002 high), we are reiterating our sell rating on shares of Overstock.

...more negative Overstock news has surfaced, namely, that Overstock's supply lines are weakening and they're generating little to no repeat business. There's even talk that Overstock will announce a major write-off in January. Some are comparing Overstock.com to a young Amazon (AMZN), which we deem utterly puerile. Amazon, in its hypergrowth phase, was led by an astute businessman. Byrne is no manager, although he's one hell of a raconteur. Our feeling is that OSTK will either plummet to the teens in early 2006 or be sold to a company that can liberate Byrne and his cohorts from five more years of misery.

Tommorow, the Wall Street Journal will publish a story on Rocker Partners, one of the firms that's betting Overstock 's share price will continue to drop. Expect to see OSTK shares take yet another whacking on Tuesday, which is when institutional traders return to work..."

In just four quarters, Overstock has redefined the art of burning cash, having driven down their $100 M cash balance to $2.5M, where it stands today. Meanwhile, shopper acquisition costs continue to rise.

Shares of Overstock are down 16% since we told readers to quickly dump shares less than 10 days ago.

posted by Catablast! Media Group @ 2:31 PM