Overstock.com Inc. (NASDAQ: OSTK) stock dropped to an eight-year low of $6.57 on Thursday as the online retailer has been struggling amongst the immense competition in the blockchain industry. Also, the company has been facing various concerns in the transformation process to the blockchain business.
The industry has been undergoing rapid change as more players have been venturing in for capturing a major share that could yield better returns in the future. The future of technology lies in data and Overstock could establishing itself more on the blockchain business rather than the current e-commerce.
The company has been facing mounting pressure from other competitors as well as from its tZero blockchain segment. The segment experienced an increase in expenses due to its non-commercial launch.
The company believes the cryptocurrencies to be a rapidly growing opportunity in the future as digital currencies could be made available to the public easily with certain amendments in the security. The market experts remained optimistic about industry performance in 2020. They expect more innovation and regulatory clarity in the industry.
Investors remained concerned about the cash burn strategy as more investments are made in the tZero unit for technology development and regulatory compliance. The company also requires additional funding for working capital, costs related to developing new products and businesses, as well as marketing and sales.
Overstock’s cash and cash equivalents balance as of September 30, 2019, decreased by 41% to $83.5 million from $141.5 million as of December 31, 2018. This was due to cash outflows from operating activities and lesser cash at the beginning of the period. The company is likely to incur further expenses related to advancement in its retail business.
For the third quarter, Overstock posted a wider-than-expected loss as a reduction in marketing activities reduced product sales. The top line was also impacted by tariffs as well as delays in the translation of search traffic into purchasing customers. The retail business revenue fell by 21% while the tZero segment revenue grew by 30%.
With the improvement in the blockchain business, the company’s stock could be hurt by the highly volatile and dramatic fluctuations in the prices of cryptocurrencies and other digital assets. Investors were cautious ahead of the company’s third-quarter earnings on February 13, 2020. However, the stock could see upward momentum in early February.
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