OSTK | New Long Idea. 60% Base Case Upside Base case 60% upside with 3x optionality on the TAIL success of Overstock ecommerce and tZero asset. On a bull case we think you're looking at 6-7% Tail EBITDA margin $400mm+ in EBITDA that should trade 15 to 20x or upwards of $8bn in value, then tack on Medici Ventures getting a Dapper Labs type valuation and you're looking at $13bn to $15bn in value vs the current EV of $3.4bn. Solid pair against Wayfair Best Idea Short.
RL: Downshifting RL to the bottom of our Long Bias list. Truth be told, upon the print last week, we were ready to punt this name entirely from our Long list. We pivoted from Short to Long in Dec with the stock at $96 calling for upside to $130-$140, and with the stock topping out at $139 a week before the print, the call had largely worked. Plus there were several factors that left us wanting on the print – most notably any meaningful top line momentum relative to peers. But after going through the model in depth this weekend, its overwhelmingly obvious to us that both guidance and the consensus are out to lunch. For the year (ending March 2022), we’re coming in at $8.69, and the company guided to something closer to $6 (the Street is at $6.12). Simply put, we think that this company is going to annihilate numbers for the balance of the year. We think the market knows this at least in part, as the stock is trading at 20x the consensus number – which is simply too high a multiple for a company with the growth characteristics of Ralph Lauren. But we’re not going to completely walk away from the name when we’re staring down the barrel of a 40% upwards earnings revision. We still think that the stock is worth 14-15x next year’s $9.30 (Street at $7.42), which still suggests $130-$140. That’s only 15% above current levels – not exactly a huge alpha generator. But we’ll stick with it for now in the face of a big earnings revision coming down the pike.
