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Will Overstock’s Strong Q2 Results Boost its Share Price?

Online furniture and home furnishings retailer Overstock (OSTK) delivered yet another solid quarter despite tough year-over-year comparisons. Its top-line increased 4% in Q2 on top of a 109% jump in revenues in the prior-year period. Furthermore, adjusted earnings of $0.73 a share came in well ahead of the Street’s estimates of $0.55. 

In response to Overstock’s Q2 earnings release, Needham analyst Anna Andreeva said, “Despite the year’s second most difficult compare and supply chain issues for the industry, 2-year sales CAGR accelerated from +22% in 4Q20 to +35% in 1Q21 to +47% in 2Q21.”

Andreeva is upbeat on continued strength in Overstock’s average order value and net revenue per active user and termed them as the “best metrics” to gauge the company’s health in the long run. Notably, in Q2, Overstock reported a 33% jump in average order value and a 20% increase in LTM (last twelve months) net revenue per active customer. 

Despite strong Q2 numbers, Overstock closed 3.4% lower on July 29, as a 22% year-over-year decline in orders delivered failed to impress. OSTK has fallen over 21% month-to-date. (See Overstock stock charts on TipRanks)

With the recent decline in price, Andreeva said, “at 1x EV/Sales on our 2022 estimate, the stock trades at a sharp discount to our Consumer E-Commerce universe (at 5x) and is valued below a basket of brick & mortar Furniture retailers (trading at 2x EV/Sales).”

Andreeva maintains a Buy rating on Overstock stock. Her bullish outlook is based on favorable industry trends, the company’s initiatives to retain customers, expansion in Canada, and its strong balance sheet. The analyst expects the stock to more than double from current levels. The price target of $150 represents 106.1% upside potential. 

On TipRanks, OSTK has received 5 positive analyst reviews for a unanimous Strong Buy consensus rating. The average Overstock price target of $127.60 implies 75.4% upside potential to current levels. 

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.