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Overstock.com Rises; Needham Rates Buy, Says Valuation 'Compelling'

A Needham analyst calls Overstock.com 'one of the most interesting ideas in e-commerce.'

Overstock.com  (OSTK) - Get Overstock.com, Inc. Report climbed Thursday after Needham initiated coverage of the online retailer with a buy rating and $150 price target while adding the company to the firm's conviction list.

Shares of the Midvale, Utah, company at last check were 5.4% higher at $90.65.

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Analyst Anna Andreeva said in a research note that she viewed Overstock as "one of the most interesting ideas in e-commerce." 

She cites such factors as relatively low penetration online for the home category, "early innings of self-help initiatives from the new operationally focused management team, elimination of Ebitda losses from Medici Ventures blockchain portfolio ... and a compelling valuation."

The conviction list consists of companies that the firm's analysts predict will outperform the broader market over the next six months.

"While OSTK fits the basket of COVID winners (sales +74% last year), sales on average were flat for the five years preceding 2020, so multiyear stacks aren’t difficult," she said. 

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"OSTK’s two-year sales run rate in first-quarter 2021 improved by about 20 points, and the company’s second-quarter 2021 guidance for flat sales embeds additional acceleration."

Andreeva sees "upside potential to both sales and margins, led by incremental customer engagement."

The analyst said the company was benefiting from favorable tailwinds in the home-and-furnishings space. Consumers moved online as brick-and-mortar stores closed and filed under the bankruptcy laws.

Andreeva estimated that 1,900 furnishings stores and another 1,200 department stores selling furniture have been shuttered.

Many stores were forced to close during the height of the pandemic to comply with social distancing and quarantine requirements.

Last month, Washington Prime  (WPG) - Get Washington Prime Group Inc. Report, a real estate investment trust that operates about 100 malls, said it filed under Chapter 11 of federal bankruptcy law due to the impact of the COVID-19 pandemic shutdown.

In April, Overstock beat Wall Street's first-quarter-earnings expectations. Earlier in the year, tZero, a subsidiary of Overstock's Medici Ventures, signed a technology integration agreement with Vertalo, a digital transfer agent.