I got this question in another thread:
Quote from: hyhl on November 15, 2007, 08:52:41 PM
David, do you know why OSTK went up a lot recently? Thanks.
So I'll initiate a thread here so I can look at it later.
I can tell you why it's been tanking all month. The mail-order retail sector has been in a tailspin since Nov. 1 when all that bad news came out after the FED spoke on Halloween. Although bullish at first, the FED news turned out to be more of a trick than a treat!
OSTK is now down 72% in a couple of months. The business and chart look similar to MALL's, but MALL's fundamentals are a lot more attractive (http://finance.yahoo.com/q/ae?s=mall), since this company is profitable and trading at 6 times 2008 EPS estimates, while OSTK has been a losing money business (http://finance.yahoo.com/q/ae?s=OSTK).
Just checking some online retailing stocks, the sector has been hit very hard.
Retail index
OSTK lost a lot of money over the years and revenues declined in 2007 vs 2006 (even though the loss in 2007 was ($45 M) vs ($101 M) in 2006).
My observations above regarding MALL and OSTK were correct, since MALL is up 43% since the analysis and OSTK is ... well, it is also up 16.7%. This is kind of surprising, online retailers are up in 2008, but we still don't know if these ascending moves are rebounds in downtrends or the start of a bullish trend.
I must admit that I'm totally confused about the situation. On one hand I have very cheap valuations in stocks like MALL or SYX, for example. On the other hand, US consumption may decline severely in 2008 and what seems cheap p/e multiples will be negative p/e multiples in the future.
I guess time will tell, as always.
Anyway, due to these doubts, my hands were weak and I paid the price.
Coming back to OSTK, it is the online retailer that I like less, I mean, the company lost money in the good times, will it make money in the bad times?
It isn't likely.