Updated from 10 a.m. EST

Shares of

Overstock.com

(OSTK) - Get Report

rose into record territory Monday morning, nudged along by an upbeat analyst note and a report of record sales.

Traffic to the online retailer's site is up markedly in recent months, indicating that the company will exceed sales estimates, said Legg Mason analyst Scott Devitt in a report issued Monday. Even though the company's shares have risen recently, they appear undervalued, after taking into account updated sales and earnings estimates, Devitt said.

"We believe the company is experiencing a strong fourth quarter," Devitt said. Overstock "has reached an inflection point in its business, which has allowed it to become one of the top destinations for online shoppers." Devitt reiterated his buy rating on the company's shares.

(Legg Mason has done investment banking business for Overstock in the last year.)

Overstock added fodder to Devitt's conclusions with its own report on Monday. Black Friday -- the day after Thanksgiving -- was the biggest sales day in the company's history, Overstock said. Meanwhile, the company reported that the number of people visiting its Web site was 31% higher between Thursday and Sunday than in the same period a week earlier.

In recent trading, after the two reports, shares of Overstock were up $2.58, or 3.9%, to $68.18. Earlier in the day, the company's stock rose as much as $4.26, or 6.5%, to $69.86, setting an all-time high.

Overstock has been the subject of a

battle for much of the year between bulls and bears. The company's stock is up a whopping 246% for the year, boosted by improving fundamentals, particularly stronger sales.

But the company has its share of skeptics. As of Nov. 8, investors were shorting about 41% of the company's shares. Bears have criticized the company for not having a clear business model -- and repeatedly returning to the public markets for more cash.

But the reports on Monday offered little but good news.

Devitt, for instance, noted that the company has for the first time joined the top 10 online shopping destinations, according to data from comScore Networks. All the other destinations in the top 10 are posting annual revenue of $1 billion or more, Devitt said. That's an indication that Overstock's revenue will soon close in on that figure as well, he said.

Devitt raised his revenue estimate for Overstock to $215 million for the fourth quarter and $796 million for next year. He left his earnings forecast for the fourth quarter unchanged at 10 cents a share, excluding charges.

Devitt's new 12-month price target for the company is $78 a share, up from a prior $69 a share.

Overstock reported that over the Thanksgiving weekend, the most popular categories on Overstock's site -- which also saw the fastest growth -- were apparel and jewelry.

"Historically, we have not seen our first big spike in traffic and sales until the first Monday after the Thanksgiving holiday weekend," CEO Patrick Byrne said in a release. The early spike this year, he said, "is a result, I believe, of the growing popularity of online shopping and the strengthening of the Overstock.com brand."

The company didn't say how 2004 Thanksgiving weekend sales compared with 2003's results.

"Given the volatile relationship between Thanksgiving weekend sales and the quarter as a whole, there is a high risk of reckless extrapolation; thus, from this year forward, we will provide less detail with regard to year-over-year sales growth," Byrne said. "This is not intended as a veiled warning, and I remain cautiously optimistic about our progress this quarter against plan."