Top D.A. Davidson analyst Tom Forte has ramped up his price target on Overstock.com, Inc. (NASDAQ:OSTK) to better reflect the company’s savvy mix of blockchain-related investments via its subsidiary Medici Ventures. The price target is now at $110, up from $85 previously, and suggests 35% upside from the current $80 share price.
According to Forte, the market has not full factored in the true value of Medici Ventures into OSTK’s share price. He explained: “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.”
Indeed, Forte emphasizes that at this point buying and owning shares is a bet on its blockchain-related investments. That’s because the original e-commerce business alone (without the blockchain boost) deserves a value of just $58/ share says Forte. Overstock was one of the first corporate adopters of bitcoin technology back in 2014- and for now the gamble is paying off. For example, OSTK accepts bitcoin as payment for items such as lawn mowers, lets employees earn their wages in bitcoin and even owns its own blockchain-based trading platform, tZero.
“Overstock is pro-freedom, including the freedom of individuals to communicate information about value and scarcity without relying on a medium created through the fiat of unaccountable government mandarins,” says CEO and founder Patrick Byrne. “For that reason, we have been an early proponent and adopter of cryptocurrencies.”
This was a brave move: Morgan Stanley makes the interesting observation that “The disparity between virtually no merchant acceptance and bitcoin’s rapid appreciation is striking.” Out of the 500 largest online retailers only three accept bitcoin as payment. But the plot thickens as Patrick Byrne stated recently that he would consider selling off the company’s legacy home e-commerce business and use the money to fund his bitcoin business ideas instead. On this news alone, the company’s stock appreciated by 36%. Management says that if such a sale were to go ahead it could be announced as early as February or March.
As for D.A. Davidson’s Tom Forte, he increases his valuation for tZERO to $49 per share from $25. “We consider tZERO a blockchain-powered investment bank. We believe tZERO has the potential to disrupt, at least three elements of the legacy investment banking sector: settlement, short selling and issuance.” Like a child that becomes more successful than their parents, tZero has the potential to seriously eclipse Overstock’s traditional business says Forte. His ambitions for the platform are extensive:
“We continue to forecast it achieving a 0.25% share of the U.S. investment banking market, $284B in size, according to the U.S. Census Bureau, with a margin profile two-thirds of Goldman Sach’s 36.9% adj. EBITDA margin (or 24.6%). This would result in $1.2B in sales in 2027 with $299M in adj. EBITDA.”
Overstock has an 81% holding in tZero- with other positions held by legendary investor George Soros and Passport Capital. A further sale of a minority interest in tZero could also prove a further catalyst for OSTK says Forte. At the same time, Forte is also a fan of Medici’s investments in two other notable cryptocurrencies, namely Bitt and DeSoto. “After tZERO, we consider Bitt and De Soto to have the greatest potential, today, in driving shareholder value for OSTK.”
Bitt offers consumers a digital wallet where in addition to crypto currencies, such as Bitcoin, consumers can use crypto fiat currencies (a crypto version of legal tender like the US dollar). Meanwhile Overstock also invested $14M for a 50% stake in De Soto, a company that wants to use the blockchain to prove property rights for consumers in emerging markets.
TipRanks reveals that Tom Forte is a top analyst worth tracking by investors. He boasts a 62% success rate and 16.4% average return across his 161 stock ratings. But more astoundingly, if we zoom in on his track record on OSTK, we can see some incredible figures. Over his 14 buy ratings on the stock since November 2016, he has achieved an 88% success rate and a very impressive 210% return.