Overstock Analyst Cuts Price Target, Predicts Soft Q4 Numbers

The sell-off in Overstock.com Inc (NASDAQ: OSTK) over the past month continued on Thursday after one Wall Street analyst raised concerns about the company’s fourth-quarter performance.

The Analyst: Bank of America analyst Curtis Nagle reiterated a Buy rating for Overstock and cut his price target from $110 to $100.

Related Link: Long Overstock, Short Wayfair? A Potential E-Commerce Pair Trade Ahead Of Earnings

The Thesis: On Thursday, Nagle said he is seeing three fourth-quarter trends that suggest Overstock’s fourth-quarter numbers won’t be as strong as he had previously anticipated.

First, the overall holiday season has been choppy so far for online shopping. Second, Nagle said rising online advertising rates and changes to the Apple, Inc. (NASDAQ: AAPL) privacy policy may be headwinds for Overstock this quarter. Finally, Nagle has observed a slowdown in overall online furnishings spending in December compared to November.

Web traffic has been a strong predictor of sales for Overstock in the past, and Nagle said traffic has softened in early December.

Fortunately for investors, Nagle said Overstock shares still represent an attractive buying opportunity after dropping more than 38% in the past month.

“We believe a weaker than expected 4Q is largely priced into shares (down 37% from peak on 11/19 vs. flat for S&P 500) and we see valuation as attractive at 0.8x 2022 EV/sales,” he said.

Looking ahead to 2022, Nagle said Overstock still has plenty of growth levers to pull, and he prefers the stock over competitor Wayfair Inc (NYSE: W). Bank of America is projecting 43.4% EPS growth in 2022 and 12.3% sales growth for Overstock.

Benzinga’s Take: It’s been a tough month for Overstock.com investors, but long-term holders should keep the recent swoon in perspective. Overstock shares have still narrowly outperformed the S&P 500 year-to-date in 2021 and have more than doubled the S&P 500’s return over the last three years.