- Needham analyst Anna Andreeva downgraded Overstock.com OSTK from Buy to Hold and removed the $30 price target.
- The analyst said through 3Q22, home furnishings industry (using U.S. Census data) grew 2%, and November further decelerated to -2%.
- Overstock outgrew Wayfair Inc W or seven consecutive quarters (1Q20-4Q21), which reversed this year.
- The analyst expects Wayfair to remain on offense in '23 as the company pushes ahead to restore profitability and as supplier inventories remain elevated until at least 1H23.
- With active customer base ~1/3 that of Wayfair, the analyst thinks Overstock gets lost in the aggressive promotional tenor of a larger competitor.
- Also Read: Choppy Waters: S&P 500 Will Trade In This Range Over The Next 3 Years, Says Market Veteran
- The analyst still expects gross margin upside in '23 as OSTK yields operational efficiencies--Sales & Marketing likely doesn't have much opportunity given new influencer campaigns under the new CMO.
- OSTK has a stellar balance sheet with $9 in cash/share (~1/2 of market cap) and there should be some optionality from Tzero in the longer term--although the analyst thinks valuation could contract in absence of top line recovery.
- In the 3 years pre-pandemic, OSTK sales declined in high-single-digit on average, with pandemic share gains aided by supply chain dislocation.
- Now as industry oversupply likely continues into '23, and larger competitors Amazon.Com, Inc. AMZN and especially Wayfair still promote aggressively, the analyst thinks OSTK is a share donor again.
- Price Action: OSTK shares are trading lower by 1.46% at $18.60 on the last check Wednesday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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