Everyone wants the novel coronavirus pandemic to come to an end. But if you’re invested in an e-commerce company like Overstock (NASDAQ:OSTK), it’s also fair to question what will happen to your investment in OSTK stock once vaccines are in wide distribution.
The pandemic has been nothing short of horrific in the last year, with more than 10 million cases and 240,000 deaths in the U.S. alone. It has also forced us to change our lives — where we work, what we do for fun and how we shop. E-commerce stocks have been some of the biggest winners as a result.
In the early weeks of the pandemic, many brick-and-mortar stores closed entirely or only operated with curbside pickup or delivery options. In subsequent months, e-commerce remained popular because people found it incredibly convenient and also didn’t want to risk going to stores and potentially exposing themselves to Covid-19.
The Rise and Fall of OSTK Stock
You would be hard-pressed to find a name that rose as fast as OSTK stock this year.
Less than six months ago, Overstock was less than $20 per share. But as people who were stuck at home ramped up their online shopping, the home goods retailer saw its stock go through the roof. By August, OSTK stock was almost $130, and up nearly 5,000% from its March lows.
That’s just a ridiculous jump.
But all good things must come to an end. In the last three months, fears set in that Covid-19 gains would be short-lived and that Overstock was overbought.
Subsequently, OSTK fell more than 55%.
And that was before this week, when Pfizer (NYSE:PFE) announced its vaccine candidate was more than 90% effective against Covid-19. That announcement led experts like Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, to predict that the vaccine would be available before the end of the year.
The news triggered yet another round of profit-taking, as Overstock fell another 20% this week.
Overstock Earnings Shed Some Light
Earnings give investors a reason for optimism, however.
The third-quarter report showed sales of $731.7 million, which beat analysts’ predictions of $585.6 million. Earnings came in at 50 cents per share, which was light years ahead of analysts’ expectations of a loss of 2 cents per share.
“We’re pleased the third-quarter sales performance remains strong,” CFO Adrianne Lee told analysts. “Although it’s difficult to predict future trends right now, we believe that the shift to purchasing home furnishings online will continue and that this shift should serve as a tailwind for us. Recall that our goal is to gain market share and in expanding U.S. online home furnishings market.”
Overstock says its customer count grew by 141% year-over-year in the third quarter. Sales were up more than 100% even as brick-and-mortar stores began to reopen, as online sales accounted for 35% of all home furnishing sales in the quarter.
Piper Sandler analyst Peter Keith issued a note saying he remains an “aggressive” buyer of OSTK stock following the earnings report. He gave the stock an “overweight” rating and set a price target of $140, predicting that sales growth will continue.
The Bottom Line
Two months ago I wrote that the drop in OSTK stock is a huge buying opportunity. That was shortly after the company reported a Q2 earnings beat.
Now that Overstock followed up with another earnings beat for Q3, I’m still bullish on the stock. I believe that Overstock will continue to grow even after Covid-19 cases fall and a vaccine becomes readily available.
The drive to e-commerce is here to stay, and Overstock has expanded its customer base as consumers enjoy the convenience of shopping online.
Overstock continues to have an “A” rating in my Portfolio Grader and a strong buy recommendation.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.