Despite missing on the top-line, investors appeared to react positively to Overstock’s (OSTK) latest quarterly report, sending shares up by 41% over the two subsequent sessions.
The company generated revenue of $613 million in 4Q21, amounting to a year-over-year drop of 8.5%, while missing the Street’s call by $31.33 million. Active customers also fell – by 12% from the same period last year to 8.1 million.
That said, as the company pivots the business away from a wider selection toward home goods only, the average order value rose by 23% year-over-year to $206.
“This is resulting in fewer but more valuable customers,” said Wedbush’s Michael Pachter, “And as Overstock delivers on its value proposition, its customer base is likely to return to growth by next year.”
Pachter also notes that in 2021, Overstock increased its market shares by 50 basis points owing to better handling of the supply chain snags than peers. That increase follows 2020’s 200 basis point market share gain.
In further good news, the company beat the estimates on the bottom-line, as adjusted EPS came in at $0.36 – $0.10 above consensus.
However, while the profit beat can take some credit for the post-earnings surge, Pachter attributes the rise to another development.
“The big news that drove shares higher alongside Overstock’s report is that tZERO (Overstock’s blockchain venture) appointed a new CEO, David Goone, who will leave Intercontinental Exchange at the end of the month to join tZERO in March,” the analyst explained. “This news was coupled with the announcement that tZERO completed a funding round led by ICE, with a $15 million contribution from Overstock, as well as a contribution from Pelion.”
All in all, given Pachter’s belief that in an environment of rising prices and supply chain issues, Overstock is “well-positioned to continue taking market share from higher priced competitors,” its name stays on the analyst’s “Best Ideas List.” However, given a “slightly slower growth rate and less value assigned by investors post-pandemic,” the price target is reduced from $115 to $95. Nevertheless, there’s still room for growth of 79% in the year ahead. Pachter’s rating stays an Outperform (i.e., Buy). (To watch Pachter’s track record, click here)
Most on the Street are on the same page here; OSTK’s Strong Buy consensus rating is based on 5 Buys vs. 1 Hold. Shares are expected to gain 96% of muscle over the coming year, given the average target clocks in at $104.20. (See Overstock stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
