Microsoft, Overstock, Vista Outdoor: Top Stocks

Piper Sandler analysts name Microsoft (MSFT) as the top large-cap stock to own. Hedge fund JAT Capital discloses its 9.1% stake in Overstock (OSTK), now voicing demands for a management overhaul of the online retailer. Vista Outdoor (VSTO) shares plummet, closing Monday over 20% lower after cutting its full-year sales forecast.

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Video Transcript

JULIE HYMAN: Couple of things going on here. On the one hand, a company said that LinkedIn, which is a unit of Microsoft, had laid off almost 700 employees in its second round of cuts this year. Also, Microsoft overall getting some praise from Piper Sandler, which flagged it as the highest conviction large-cap stock to own. So that seemed to be helping those Microsoft shares, even as kind of two things going on today.

JOSH LIPTON: Yeah. Over there you have at Pipe, you've got Brent Bracelin, a longtime analyst, saying the company's first mover advantage in generative AI is what he's in part calling out here. So he's overweight his price target as 400. And then we did also get that, as you know, that LinkedIn news as well. Microsoft cutting about 668 roles. So even more attention, I think, now on Microsoft's earnings report. That'll be a key question. They're going to give you-- they're going to tell you how LinkedIn is performing and tell you what the outlook is for that business segment.

JULIE HYMAN: Yeah. And that earnings report is due on October 24. So we still have a little time to wait for that. Did you-- I'm not sure if you mentioned Brent Bracelin price target on the stock.

JOSH LIPTON: Yeah, it is.

JULIE HYMAN: $400.

JOSH LIPTON: 400, yeah. And a nice run for the stock this year. You're up about 40% year-to-date.

JULIE HYMAN: Right. So looking for yet more upside.

JOSH LIPTON: All right. Shares of Overstock, let's check out that one, too, jumping today after the hedge fund JAT Capital Management disclosed a 9% stake in the company. The firm run by John Thaler, said the discount retailer should consider selling certain assets and overhauling its management. They may seek board seats if they are ignored. They will not be ignored, Julie. That's not going to happen.

JULIE HYMAN: Yeah, it does seems. I mean, Overstock has been such an interesting story this year, right? And it's not just this year, but sort of over the life of the company, sort of known as a cast off retailer selling discount castoffs, and then has pivoted in more recent years to be a sort of more mainstream decor retailer, then acquiring the Bed Bath & Beyond name online.

And so even though the company now is called Overstock, the website is Bed Bath & Beyond. And it sells a lot of the merchandise that was once offered by Bed Bath & Beyond. So it's been an interesting journey for Overstock. And now it's an interesting moment for an activist like this to get involved with the company. See that to your stock look-- to your chart, I should say, looks pretty ugly. We'll see if JAT and John Thaler can make any--

JOSH LIPTON: Yeah. It sounds like, listen, they're making suggestions. And if they don't listen to these suggestions, they may have a proxy fight on their hands.

JULIE HYMAN: Right. So we'll have to see what happens with that company. And then we are also looking at Vista Outdoor. The stock ending the day down by 24% after it cut its full year sales target and announced it would sell its sporting products business for $1.91 billion. The company says earnings ex some items are now going to be at most $4.05 a share. Before the bottom end of its forecast, it was $4.50.

And by the way, sporting products is a euphemism as far as I can tell. It mostly includes ammunition, right? So that it looks like that is the business that it is offloading.

JOSH LIPTON: Big ammunition brands, so Federal, Remington. It is interesting the team at B. Riley, they've been covering this name for a long time. They are still optimistic here. Improvements in market share, underlying product demand, they did reiterate their clients. Price targets 47, they say.

JULIE HYMAN: Well, and the business that they're holding on to the outdoor products, business also has a lot of iconic well-known outdoor names. They own Camelbak, you know, the water sleeves and bottles. Bushnell, as well as Bushnell Golf is something that they own as well, which I recognize. And then there are some other sort of, I guess, I actually don't know what Gunmate is, but I assume it is something gun-related, doesn't include the ammunition stuff that is getting sold.

JOSH LIPTON: I remember during, it was like 2021. It was during the pandemic. And a lot of people were rediscovering the outdoors. They were going camping, hiking, hunting. And I remember a lot of investors and folks on the Street were saying this was one name to play in.

JULIE HYMAN: Yeah. Well, as we know, a lot of normalization has been positive and negative depending on the name you're talking about.

JOSH LIPTON: That is true.