How Overstock.com Shares Rose 16% in June

Markets Motley Fool

What happened

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Shares of Overstock.com (NASDAQ: OSTK) gained 16% in June, according to data from S&P Global Market Intelligence.

So what

At first glance, Overstock didn't have much news to share in June. Dig a little deeper and you'll find the stock arguably rising due to two important trends. First, analysts lavished praise on Overstock rival Wayfair (NYSE: W) last month, and what's good for the goose is good for the gander. Second, Overstock is an early adopter of bitcoin and other blockchain technologies, and the crypto-currency industry has been on a tear lately. Together, these seemingly unrelated market trends explain why Overstock shares were on the move in June.

Now what

The Medici operation that accounts for Overstock's blockchain operations has exploded from $1.9 million in 2015 revenue to $15.2 million in 2016. The annual run rate for this segment stood at $17.4 million in the recently reported first quarter, but with a 58% year-over-year growth tailwind at its back. Expect this technology to become a larger and more important part of the Overstock story over time, kind of like how archrival Amazon.com's Amazon Web Services now generates 89% of the e-tailer's operating income. It isn't wrong to raise Overstock's valuation when crypto currencies are doing well.

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As for the Wayfair connection, Overstock CEO Patrick Byrne spent a lot of time talking about exactly that on the latest earnings call and clearly sees the company as an important peer. That's not necessarily a bad thing, considering Wayfair's strong sales growth and skyrocketing share prices, but that company is throwing some shade over Overstock's e-commerce business these days.

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Anders Bylund owns shares of AMZN. The Motley Fool owns shares of and recommends AMZN and Wayfair. The Motley Fool has a disclosure policy.