We are hosting a Black Book on Wednesday April 10th at 12:30pm on Best Idea Long Beyond Inc. (BYON) in which we will walk through the Bull and Bear debate, quantify a revenue and margin walk across multiple durations, and show where we think both numbers and the stock should head over a TREND and TAIL duration. Ultimately, we think a Base is a double from the stock's current $35 – and if management really executes, this name goes well over $100.
For those unfamiliar with the BYON story – this is the former Overstock.com. But for all intents and purposes, it is half e-comm start-up, and half retail turnaround. To be clear, the track record for both of those types of stories is very rocky – especially turnarounds. Only about 1 in every 10 actually works. We've been there, done/seen that. As such we're looking at BYON through a VERY critical and cynical lens. But are still coming up with numbers meaningfully higher than consensus.
As background, the former Overstock.com was 'turned off' when the former management team acquired the Bed, Bath & Beyond IP out of bankruptcy court. Consumers were routed to Bed, Bath's website. This is one of the worst gaffe's we've ever seen by a management team in Retail. They took a brand/business that's been around, and largely profitable, since nearly the advent of the internet, and just shut it down. The business collapsed, and management was subsequently (and justifiably) fired.
Enter the Lemonis era...
Marcus Lemonis, CEO of Camping World Holdings (CWH), and long-time retail/consumer-facing business guru was appointed Chairman of BYON. Think what you will of him (most people have an opinion one way or the other), but we think he's a far better and higher quality leader than a business like BYON probably deserves. Lemonis draws no cash compensation, and is heavily compensated in options that strike between $45 and $60. We recently interviewed Lemonis, which you can watch HERE.
Shortly after our interview with Lemonis, BYON acquired the Zulily IP for just $4.5mm, not bad for a business that had peak revenue of $1.4bn. Now the company has a three-tier branding strategy...1) Overstock at the low end – largely selling close-out home goods and will re-launch around Wayfair's WayDay in April, 2) Beyond (which has a multi-prong branding strategy – think Beyond Kids, Beyond Backyard, Beyond Dorm, etc...) which we expect the company to creatively market with the use of influencers and TV programming (Lemonis has an impressive rolodex) with partners compensated in stock, and 3) Zulily, which is, in effect a flash-sale site for more premium consumer goods (think Nike, Coach, Arcteryx). There are clear dividing lines between the brands, unlike when BYON initially bought the Bed Bath IP.
Make no mistake, this is very much a human capital story. Execution of this start-up/turnaround is everything. Across it's portfolio of brands, the company collectively has nearly 50 million past customers that need to be re-engaged and converted into sustainable revenue growth. Again, not an easy feat. We'll delve into how that happens in our deck.
Our estimates – beginning almost immediately, are nearly 5x the 'consensus' and we build to $6 per share over a TAIL duration and $400mm in EBITDA, with the Street underwriting something closer to $2ps. As this is really a brand new company, historical multiples are absolutely irrelevant, as is the 'historical margin structure'. In a Bull case scenario, we think margins should go from -4% last year to 10%+ over a TAIL duration – simply massive, with outsized Operating Asset turns that should drive ROIC to new highs. But the driver will be outsized top line growth, which should command a premium multiple. The pushback we get today is that it's too small and illiquid for many institutions to buy. But putting 20x EBITDA on this model builds to a $7bn EV, or a stock price of $150-$160. If you can't buy it today, you'll still have to time to get a 2-3 bagger out of this when it hits $60 and Lemonis' options vest. It's very poorly covered by Old Wall, and there's more idiosyncratic drivers to this story than any we can find in Retail today. This model is a game-changer. Calls like this don't come around too often. Not for the risk-averse, but we think a big winner over a multi-year time period.
Call Details
Wednesday April 10th at 12:30PM ET
Live Video Link: CLICK HERE
Add to Calendar: CLICK HERE