It is safe to say investors of online retailer Overstock (OSTK) are so far satisfied with 2020’s returns. Not many stocks can boast year-to-date gains of 975%.
However, according to Needham analyst Rick Patel, the outperformer has more upside ahead.
Patel initiated coverage on OSTK shares with a Buy rating, alongside a $96 price target, implying shares can add another 27% from current levels. (To watch Patel's track record, click here)
So, what prompts an analyst to recommend investors snap up shares after such an incredible run up?
Patel explained, “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. Concurrently, Overstock has benefited from a more focused strategy and self-help initiatives across mobile, pricing, marketing and customer service. In our view, higher revenue should leverage expenses, driving higher margins.”
The focused strategy Patel mentions is due to a shakeup at the top. Patel believes recent years’ underperformance was due to a “lack of focus with too many strategies being executed at once.” In contrast, the analyst expects the new management’s sharpened focus to “monetize both with low-hanging operational fruit and favorable market conditions for home products.”
Overstock also has another differentiator, in its focus on blockchain tech through subsidiaries Medici Ventures and tZERO. These “non-core” businesses don’t currently represent a massive chunk of the company’s revenue stream but “create optionality.”
Additionally, a new B2B partnership with the GSA (General Services Administration) could help expand Overstock’s TAM (total addressable market). The recently awarded federal government contract (also given to Amazon and Thermo Fisher Scientific) will pilot the use of commercial e-marketplaces, allowing federal agencies’ personnel to purchase workplace products costing less than $10,000.
Summing up his assessment, Patel calls OSTK a “compelling growth story with solid momentum.”
So, that’s Needham’s view, how does the high-flying Overstock fare amongst Patel’s colleagues? Based on 3 Buys and 1 Hold, the stock has a Strong Buy consensus rating. The average price target comes in at $104.25 and suggests possible upside of 38% over the coming months.
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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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.