Overstock's Huge Upside Hinges On Blockchain; DA Davidson Raises Target To $110

Overstock.com Inc OSTK has been on quite a run on the past six months, gaining more than 415 percent on investor enthusiasm for its bitcoin exposure. At least one analyst sees significant upside remaining for Overstock, but it all hinges on blockchain technology.

The Analyst

D.A. Davidson analyst Tom Forte reiterated his Buy rating for Overstock.com and raised his price target from $85 to $110.

The Thesis

Forte’s bull case for Overstock is all about the company’s Medici Ventures portfolio of 10 investments related to blockchain technology. Forte values Overstock’s core e-commerce business at just $58 per share, noting that any investors buying the stock at this point hoping for upside from its current price should understand they are simply making a bet on blockchain.

“Given our view that not only is there tremendous value in its holdings, but it owns, by far, the best portfolio of blockchain-related assets among current publicly-traded equities, we believe the stock merits such a valuation,” Forte wrote in a Monday note.

Additionally, Forte said there's a possibility Overstock could completely pivot to blockchain by selling its e-commerce business to a brick-and-mortar retailer, which could serve as a catalyst for the stock. Forte said a company like TJX Companies Inc TJX, or Costco Wholesale Corporation COST could really make an online splash by buying Overstock’s e-commerce business. Overstock management has said a deal could be announced as soon as February.

Forte said the most valuable blockchain asset Overstock currently owns is the tZERO blockchain-powered investment bank, which D.A. Davidson values at $49 per share. Forte said tZERO has major disruptive potential when it comes to settlement, short selling, and issuance. In the firm's bull-case scenario, Forte sees upside potential for Overstock as high as $261 per share.

Price Action

Overstock shares traded higher by about 1 percent at $85.19 Monday morning, and are up another 30 percent so far in 2018.

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