We came across a bullish thesis on Beyond, Inc. (BYON) on Substack by Unemployed Value Degen. In this article, we will summarize the bulls’ thesis on BYON. Beyond, Inc. (BYON)’s share was trading at $6.41 as of Nov 8th.
Close-up shot of a customer browsing stylish home décor items in an online retailer.
Beyond Inc. (BYON), the rebranded Overstock.com, has dramatically transformed after acquiring Bed, Bath, and Beyond’s intellectual property and digital assets. This strategic pivot was intended to broaden its product base and establish an omnichannel presence, but the integration has faced significant obstacles, with BYON suffering operational setbacks and financial strain. Following the integration, BYON’s ambitious plan to merge inventory from Overstock.com and BedBathandBeyond.com introduced 13 million SKUs, which left customers overwhelmed and caused a decline in conversions. Conversion rates dropped from 2.2% to 1.3%, a blow that led BYON to announce “unacceptable” recent results in a three-hour earnings call. Management has since initiated corrective measures, including separating SKUs to match customer expectations for each brand and laying off 20% of its workforce to improve operational efficiency.
Despite these challenges, BYON remains financially sound, with a substantial $140 million in cash reserves and no long-term debt. The company has embarked on cost-cutting measures, yet the financial impact from these moves won’t likely manifest until a few quarters down the line. BYON’s leadership is optimistic, forecasting a turnaround to historical profit margins within two to three quarters. Management expects substantial improvements in revenue and margins in the upcoming quarter. Additionally, BYON is actively monetizing assets to bridge any potential cash gaps. For example, the company recently sold its headquarters, with proceeds expected next quarter, and holds investments in blockchain companies via Medici Ventures. Although BYON intends to preserve its cash position, it could liquidate assets before resorting to debt if necessary.
BYON’s strategic vision includes a promising partnership with The Container Store (TCS), where it has offered $40 million for convertible preferred stock, translating to a 40% equity stake in TCS. This offer, however, is contingent upon TCS securing a debt refinancing by mid-November, though both parties may extend this deadline if needed. The partnership is expected to yield mutual benefits: BYON would gain a retail presence through TCS’s stores, strengthening its omnichannel model, while TCS would leverage BYON’s advanced data analytics and financing options to improve sales and operational efficiency. BYON is also eyeing other potential partnerships, including a recent agreement with Kirkland’s, reinforcing its commitment to reestablishing Bed Bath and Beyond’s presence in brick-and-mortar spaces. These partnerships underscore BYON’s asset-light strategy, which aims to enjoy the benefits of a physical footprint without the costs associated with maintaining retail stores and inventory.
The market has shown considerable optimism toward BYON, valuing it at approximately 10% of its peak 2022 revenue—a level that underscores the potential upside if its turnaround efforts succeed. While BYON currently operates at a loss, its substantial cash reserves and active restructuring initiatives provide a solid foundation for navigating this challenging period. Unlike companies encumbered by long-term debt, BYON’s debt-free status offers it flexibility in implementing its recovery strategy, bolstering its capacity to restore operational efficiency and financial stability.
BYON’s near-term priorities are to stabilize operations, return to profitability, and leverage the TCS partnership to expand its omnichannel presence and improve supplier negotiations. BYON’s ample cash and flexible asset liquidation strategy offer a promising runway for recovery. The proposed TCS investment provides an indirect route to participate in TCS’s custom closet business, a core asset, without BYON needing direct ownership of stores or inventory. As BYON’s management moves closer to realizing its omnichannel ambitions, the company presents an intriguing investment prospect with substantial upside if its turnaround plan succeeds.
Beyond, Inc. (BYON) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held BYON at the end of the second quarter which was 22 in the previous quarter. While we acknowledge the risk and potential of BYON as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BYON but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.