Shares of Internet furniture retailer Overstock (OSTK) are trending lower despite a solid quarterly performance.
Notably, Overstock stock has declined 17% in three months. Profit booking after a stellar up-move, and skepticism over its turnaround process, could be the possible reasons behind this decline. (See Overstock stock charts on TipRanks)
The recent decline in its price has driven its valuation lower. Notably, Overstock stock is trading at forward EV/sales multiple of 0.9. I have a bullish outlook on OSTK.
Anna Andreeva of Needham stated that “at <1x EV/Sales on our 2022 estimate,” Overstock is trading at a considerable discount to “our Consumer E-Commerce universe (at 5x).”
Moreover, she added that Overstock is also “valued below a basket of brick & mortar Furniture retailers (trading at 2x EV/Sales).”
Meanwhile, commenting on Overstock’s turnaround strategy, Andreeva said that “the company is in the early innings of new buyer retention initiatives, which we expect to drive a more sticky customer base while allowing it to maintain healthy profitability.”
Andreeva has a Buy rating on Overstock stock, with a price target of $150. She expects the company to benefit from a favorable demand environment and expansion of TAM (total addressable market).
Notably, Overstock is focusing on international expansion, having entered Canada. Meanwhile, its key performance metrics remain strong. For instance, its active customers reached 9.2 million. Meanwhile, its average order value and net revenue per active customer increased by 33% and 20%, respectively, on a year-over-year basis.
Overall, on TipRanks, OSTK has received five bullish analyst reviews for a unanimous Strong Buy consensus rating. The average Overstock price target of $124.40 implies 76.7% upside potential to current levels.
Further, OSTK scores 9 out of 10 on TipRanks’ Smart Score rating system, indicating that it has strong potential to outperform market expectations.
Disclosure: On the date of publication, Amit Singh had no position in any of the companies discussed in this article.
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