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Piper Sandler Sees More Upside Ahead For Overstock, Sending E-Commerce Stock Higher

Piper Sandler Sees More Upside Ahead For Overstock, Sending E-Commerce Stock Higher

Shares of Inc (NASDAQ: OSTK) were on fire Monday after Piper Sandler analysts said the stock has further room to run despite a year-to-date gain of 1,200%. 

The Overstock Analyst: Peter Keith initiated coverage of Overstock with an Overweight rating and $140 price target.

The Overstock Takeaways: Overstock operates within the $300-billion U.S. home furnishings market and was a direct beneficiary of consumers spending more money on home-related items during the COVID-19 pandemic, Keith said in the initiation note. (See his track record here.)

The overall portion of online home furnishing sales rose from 23% to 32% of total industry sales in the second quarter, the analyst said.

Overstock is well-positioned to benefit from an "exceptionally strong" environment over the next five years, he said.

The bullish case for Overstock is also based on a recent leadership change and the following compelling initiatives, Keith said: 

  • Improving the mobile shopping experience.
  • Focusing on the core value-conscious consumer. 
  • More effective targeted pricing and promotions.

These initiatives should help Overstock show a compounded annual revenue growth rate of more than 30% over the next 30 months, while EBITDA margins should improve from negative 5% in 2019 to positive 4% in 2022, according to Piper Sandler. 

Overstock's exposure to the blockchain universe is "worth mentioning" and shouldn't be considered a distraction to the core business, but rather a "minor call option," the analyst said.

The two businesses are tZero, an alternative trading system for security tokens, and Medici Ventures, a portfolio of blockchain companies in which Overstock holds a minority stake.

Overstock is now an EBITDA profitable company, and a $140 price target based on two times EV/sales on 2021 estimates is "reasonable" compared to the peer group average of four times, Keith said. 

OSTK Price Action: Shares of Overstock were trading higher by 25.3% to $116.98 at the time of publication Monday. 

Related Links:

Benzinga's Top Upgrades, Downgrades For August 17, 2020

'A Subdued Market': Stock Market Update For The Week Ahead

Photo courtesy of Overstock. 

Latest Ratings for OSTK

Oct 2020NeedhamMaintainsBuy
Sep 2020Credit SuisseInitiates Coverage OnOutperform
Sep 2020WedbushInitiates Coverage OnOutperform

View More Analyst Ratings for OSTK
View the Latest Analyst Ratings


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