OSTK

[David Randolph]

I got this question in another thread:

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.

[Leaira]

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!

[David Randolph]

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, since this company is profitable and trading at 6 times 2008 EPS estimates, while OSTK has been a losing money business.

Just checking some online retailing stocks, the sector has been hit very hard.

[BigSully1]

Retail index

[David Randolph]

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.