Once upon a time, Overstock.com (NASDAQ:OSTK) was a simple e-commerce stock. The company picked up unsold surplus inventories from other retailers, resold them at a slim operating margin, and hoped that a steadily growing revenue line would unlock actual profits at some point. Bottom-line earnings and cash flows stayed consistently negative, and the stock moved largely sideways in the long run.

OSTK Chart

OSTK data by YCharts

Things changed in 2016, when founder and CEO Patrick Byrne announced a new business plan. Overstock's online retail operations were paired with a blockchain-based research and investment arm, hoping to take advantage of cryptocurrencies and related technologies just as that market started to skyrocket. The stock jumped 42% higher in 2016, followed by a 265% surge in 2017. When the crypto market collapsed again, Overstock's shares plunged 79% lower in 2018.

The downtrend has not changed in 2019, despite a dramatic return of rising cryptocurrency prices. Overstock investors have absorbed another 30% value loss this year.

What's wrong with Overstock?

It's not hard to see why. In the first quarter of 2019, Overstock's business misfired on nearly every cylinder. Retail sales fell 18% year over year alongside thinner gross margins in that division. The tZERO blockchain-based trading platform collected 7% lower revenue and 22% lower gross profit. Other operations, including blockchain ideas that don't fall under the tZERO umbrella plus Overstock's cryptocurrency investments, saw sales surge 26% higher -- but that segment also quadrupled its pre-tax losses.

Three years after Overstock's first entry into the blockchain space, those operations contribute just 1.4% of the company's quarterly revenues but 69% of pre-tax losses. A year ago, the revenue contribution was 1.2% while the pre-tax loss share stopped at 39%. Blockchain activities are gaining traction in terms of revenue growth, but at the cost of ballooning negative bottom-line effects. It's no surprise to see share prices plunging against that backdrop, even if cryptocurrencies and other blockchain technologies are gaining market respect again.

A metal chain twists across a shiny white table. The view is focused in a single link covered in hexadecimal encryption keys.

Image source: Getty Images.

What's next?

In the first-quarter earnings call, Byrne outlined a vision for his company's near-term future:

"The whole blockchain side of the business will be structured so that next year just the cash that retail spits out supports the blockchain side of the business," he said. "As a worst case, we're all good. Now if anything happens after that, like there is financing and capitalization of some of these blockchain companies where tZERO turns into the oil gusher that I think it is, then that's all gravy."

That sounds good, assuming that management's expectations are on target. However, there are plenty of "ifs" and "buts" built into that assumption. I would not bet the house on Overstock today, and any smaller investments heading in this stock's direction would be made with the understanding that both the retail business and the blockchain plans could fail to deliver on their promises. In that case, Overstock's stock could become completely worthless in a couple of years.

So I see this as more of a gambling chip than an investment today. Don't invest any money you can't afford to lose in this ticker. That's good advice for any stock at any time, but even more so for this basket of risky endeavors.