Yesterday, Overstock.com (NASDAQ:OSTK) CEO Patrick Byrne announced that the integration of Bitcoin will add $0.04 per share to its earnings this year. The company started accepting this type of currency in January of this year, and so far payments have exceeded $2 million so far, or about one-quarter of 1% of total sales. The early adoption of this currency is paying off and Byrne stated that Bitcoin payments have accelerated to $15,000 per day, and they expect the total to be between $6 million to $8 million in 2014.
The reason for the benefit to EPS comes from the savings that the crypto-currency provides over credit card processors. A credit card processor typically charges 3% per transaction fee. However, OSTK has a deal with Coinbase, which charges Overstock less than 1% for processing. With Overstock operating in the acutely competitive online retail environment, and razor thin margins, this adoption of Bitcoin is quite beneficial. Moreover, the partnership with Coinbase mitigates the risk of fluctuations of the exchange rate, as the Bitcoins are immediately converted into USD.
In my previous article, "Overstock: Undervalued As It Launches Initiatives With Limited Downside, But Potentially Tremendous Upside," when OSTK was trading at $13.97 per share, I opined that the Bitcoin integration could "improve the bottom-line greatly." This announcement proves that this initiative is accretive, and has the opportunity to be even more beneficial. With OSTK launching a number of other high upside, low downside initiatives, OSTK still presents an asymmetric risk/reward opportunity.
Disclosure: The author is long OSTK. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.