Overstock.com Is Firing On All Cylinders
is an interesting story. The company, a leader in eCommerce/home furnishings, has suffered from market malaise for years and its foray into cryptocurrency didn’t really help. At least not then. But this is now. Now the company is riding the same tidal wave of growth as other digitally-focused eCommerce retailers and benefiting from multiple trends.
The two most important are the shift to eCommerce and home improvement sparked by the pandemic but those are not the only trends. The company not only sells home furnishings on the Internet it has offerings in the platform-as-a-service category, fintech, and blockchain/cryptocurrency.
"In our view, Overstock is benefiting from external and internal factors that are driving an acceleration in revenue growth and market share gains. The ongoing secular share shift towards digital commerce has accelerated this year, and the home category is benefiting from consumer nesting; we anticipate this will continue,” says Needham
Overstock.com’s 2nd Quarter Results Are More Than Encouraging
Overstock.com reported a 109% YOY increase in revenue for the 2nd quarter which is saying a lot. As an online retailer, it only had digital revenues in previous years and others in similar positions did not post triple-digit gains. High double-digit gains yes, but not triple-digit.
Strength was noted in all segments with particular emphasis on the core business. The most important factor is earnings Earnings beat consensus by over a dollar and surprised the market with a profit. The analysts have been upping their 3rd quarter targets in the meantime but the targets are still to low, and the consensus for next year is virtually unchanged.
"The number of new customers more than tripled year over year. Importantly, our customers are buying our core products—home furnishings—from the safety of their homes as part of the country's new normal," said CEO Jonathan Johnson.
Overstock.com’s Investment In Fintech Is Paying Off
The blockchain portion of the business is also expanding at an accelerated clip. tZero ATS reported record volumes and user growth across all metrics. The total number of digitized assets including cryptocurrencies topped 2.3 million units and $22 million in value while the user base grew by 11%. Looking forward, this segment should see revenue growth accelerate further with the launch of tZero Markets later this year. tZero Markets is a retail-oriented brokerage for digitized securities.
"Through tZERO Markets, we will establish a direct relationship with our customers, while also offering a streamlined experience for onboarding and trading digital securities," says tZERO CEO Saum Noursalehi.
The Technical Outlook: Overstock.com’s Retracement Could Be Over
Overstock.com shares entered a steady, persistent sell-off following the 2Q release but that shouldn’t be surprising. The stock was up from a low of $2.57 to a high of $128.32 for a gain of nearly 5000%, it was time for lucky investors to take their profits. Now the stock appears to be in consolidation but the question is, which way will price action go from here? The price pattern looks like a bearish triangle/flag continuation but I’m not sure downward momentum will hold up. Price action is also showing support at a key retracement level with bearish momentum receding and stochastic pointing higher. In the near-term, price action may retest support the $62 level. If support is confirmed the odds of a full reversal are high.
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7 Virus-Resistant Retail Stocks to Own Now
The U.S. economy contracted by 5% in the first quarter. That was slightly larger than the 4.8 decline that was previously forecast. On the same day that GDP was released, we also learned that the ranks of those filing for unemployment claims exceeded 40 million.
But as sobering as those numbers are, they’re not completely surprising. The U.S. economy was effectively shut down as citizens did their part to slow the spread of the novel coronavirus. But the cost of those efforts is just being measured.
And one of those measurements comes in the all-important Consumer Confidence Index. The index ticked up slightly in May to 86.6. While this number is about 30% lower than where the index sat In February, it’s significantly higher than where it sat at the trough of the financial crisis and subsequent recession.
And a big reason for that is that while the brick-and-mortar economy shut down, the digital economy helped give the economy a pulse.
Consumption is a key part of our economy. That’s why consumer confidence makes up 70% of the U.S. economy. And one of the key ways that consumers express that confidence or lack thereof, is in the retail sector.
For the last few years, the story of retail has been about which retailers were going to be able to successfully compete in the e-commerce space that is still owned by Amazon (NASDAQ:AMZN). Sadly, we’re discovering that some companies, like J.C. Penney, were late to adapt in a meaningful way. But that isn’t the case for all retailers.
In this special presentation, we are identifying 7 retail stocks that have done well through this turbulent time and should use that as a springboard to continued growth.
View the "7 Virus-Resistant Retail Stocks to Own Now".