More Info (Subject page 2):
Drugstore.com has partnerships with Rite Aid and Amazon.com. While the first has put the brand on every bag in its stores, the second partner has provided a link on its page that generates 30% of its sales.
The breeze outside is that the company will run out of cash before it has a chance to break even. Although it's a likely scenario (in any company, for that matter, but more so in a cash intensive one), the company had taken measures to reduce costs and increases sales. They will run out of cash ($101M, as of Q2, ended July 1st, released today) if it has the same expense as before, but the cost is shrinking.
Decreased cost: The company manages with less warehouse space and fewer employees. Although the first may be due to better inventory management, the second is because you don't need as many employees to put new product online. What you have now is warehouse, administrative, and some technical but much less than before (once you have a "base" item to sell, it changes slowly after that). The company has around 400 employees.
Increased revenue: Although planetrx.com (which closed down) referral had been slow, Rite Aid's decision to put the brand on every bag should help Drugstore increase its sales for the foreseeable future. Other measures, such as the renovation of beauty.com (coming this fall) and "boxes shipped" ticker should encourage buying.
I believe employee options are at an ~ of $12 (please double-check with SEC). So although there hasn't been much selling by insiders, it's hard to judge whether the lack of selling is due to management's belief about its future.
My 18-month (estimated) range for the stock is $0.75-7. The company reported Q2 results eariler today. As of 9:45 ET, the last trade was @ 1.29 (ask), up $0.06 for the day.
Overall: Although I think this stock has a higher risk the most companies, at this point I can say that there are many good thinks going on to make naysayers ask "why didn't I change my mind and buy back then?" But then again, I may say, "Why did I buy?"
Note: Unless noted, this post consists of my opinion and mine only. Always do you own research before buying, selling, or holding this (or other) stock. Just remember: It's always your money at stake. Be careful out there. |
