Overstock's Stealth Pre-Announcement vs Amazon's "Record" Shipments

According to Jeff Matthews, Overstock (OSTK) CEO Patrick Byrne effectively issued a negative earnings pre-announcement on Bloomberg TV Friday morning:

...while I am not sure when Byrne’s response appeared it was probably some time after his Friday morning appearance on Bloomberg television, during which he disclosed to the Bloomberg-watching audience "disappointing" revenues for Overstock.com during the holiday season and a "negative" cash flow forecast for the year.

That negative cash flow forecast appears to be sharply at odds with at least one of Wall Street’s Finest (Craig Bibb of WR Hambrecht), whose last model (December 13) shows precisely $42.098 million of expected positive “Cash flow from operating "activities" for Overstock.com in 2005.

Thus Byrne’s Friday morning disclosure appears to be a change of guidance compared to Wall Street forecasts, even though such disclosures are, I believe, supposed to be offered in 8-K filings with the SEC and not on Bloomberg TV according to my understanding of Regulation Fair Disclosure.

If Jeff Matthews is right that Patrick Byrne did in fact issue a material statement regarding Overstock's business, the timing is particularly sly. Friday morning was one of the quietest trading days of the year; many analysts would have missed the comments. By Saturday the news was old. And by today - the first subsequent trading day - it would have warranted almost no coverage.

But the market isn't a newspaper, and OSTK is down by almost 8% as I write this, half an hour before close on Tuesday.

Meanwhile, Amazon issued a press release yesterday (the 26th) stating that:

Amazon.com, Inc. today announced that the 2005 holiday season finished as its best ever, with the company's Holiday Delight-O-Meter surpassing 108 million items ordered for the first time. The 2005 holiday season also brought another single-day record with the Delight-O-Meter tracking more than 3.6 million items ordered, or 41 items per second, on Dec. 12th.

Amazon's press release was picked up by financial news services as a positive data point, reflected in headlines like "Amazon Says Holiday Sales Set Record on IPods and Video Games" (Bloomberg) and "Amazon.com sets record for holiday orders" (Bizjournals).

But the press release in fact contained almost no useable data. There was no data about sales, margins or profits. All we know from the release is that this year set a record for Amazon's holiday sales. But of course this holiday season set a record for Amazon -- because e-commerce sales are climbing by 15-30% annually. Should Amazon's stock have reacted to the news? No, because expectations of growth are already priced-in.

Which brings us back to Patrick Byrne's stealth pre-announcement on Bloomberg TV. Is Overstock's miss company specific, or is indicative of weaker than expected e-commerce sales across the board? Might we even see disappointing results from Amazon relative to expectations (which is all that matters for the stock) when Q4 results are reported in January, despite shipments setting another record?

« Any opinions expressed on the Seeking Alpha sites are those of the individual authors and do not necessarily represent the opinion of SeekingAlpha or its management. »

Comments

[Larry Jeans...:]

T bought January puts as soon as I read that OSTK would lose money in the fourth quarter. It worked out really well.

Glad I didn't bother to look at the accounts payable forecast. Uh what is the point of analyst reports anyway? To make money or get every line item of every financial statement right.

I made money. I knew what to do when I read that Overstock was likely to love money in the fourth quarer. Not every knew what to do.

You can't make money comlaining about accounts payable on a blog. You make money by stepping up at the right time. I did. Jeff didn't. He is a whiner not a moneymaker. To each his own.

2008 Jan 27 12:08 AM