Tuesday, January 03, 2006

American Psycho: Overstock

Once again, catablast.com seems to be weeks ahead of the analysts.

As expected, Overstock was downgraded (again) on Tuesday, this time by Lehman Brothers, stating that "the company will achieve neither the expected level of top-line growth nor profitability."

You should recall that last week, WR Hambrecht cited similar concerns after "...Q4 sales were a bit disappointing and that a loss was likely," adding that "the company is likely to struggle with excess inventory into the first quarter of next year.... "

We are reiterating our OSTK price target of $17.

With negative cash flow and abysmal operational problems, OSTK's clearly in the gutter. Shares are down almost 30% since we adamantly said sell two weeks ago and well over 50% if you count the skeptical remarks we made months ago.

Top line growth will certainly slow in the next few years as they attempt to move margins to a profitable level. OSTK's history is red -- we find it disconcerting that they couldn't squeeze a profit during the holidays.

And lest you forgot, their CEO is totally insane. CEOs are paid to run operations, not crusades -- Byrne is running out of powder.

Our sources think it's time for Overstock to go private -- sometimes a lizard has to lose its tail in order to survive, right? One compelling rumor already floating on the Street -- Warren Buffett and Patrick Byrne's father are "talking." We'll leave it at that.

In other news, pundits are even drawing parallels between Byrne and Scott Blum, CEO of buy.com, a dot.conner that imploded and was finally taken private by Blum himself for 17 cents a share.

This nightmare is only beginning, as far we're concerned.

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