Providing a much-needed confidence boost, Overstock.com (NASDAQ:OSTK) Director Marcus Lemonis recently bought roughly $600,000 worth of OSTK stock. The move comes following the underlying online retailer’s disclosure of its third-quarter earnings report. Subsequently, the reveal of the insider move helped send shares dramatically higher on Monday.
Nevertheless, the business still faces significant challenges.
According to a Form 4 report filed with the U.S. Securities and Exchange Commission (SEC), Lemonis acquired 40,293 shares of OSTK stock at a per-unit price of $14.79. That comes out to a total of slightly over $595,933. Notably, Lemonis currently serves as the CEO of Camping World (NYSE:CWH).
Earlier this month, Lemonis acquired 64,800 shares of Overstock stock across two separate transactions. Also, on Oct. 6 (and revealed Oct. 10 in a filing), he bought 42,200 shares at a unit price of $17.43, per Fintel.
On paper, the endorsement features significantly positive implications for Overstock. Gaining popularity from CNBC’s program “The Profit,” the theme of the program involves Lemonis offering a cash infusion for struggling companies in exchange for a piece of the business. Essentially, that’s what is going on with the director’s insider acquisition of OSTK stock.
OSTK Stock Receives a Confidence Boost Amid Major Challenges
After soaring higher in the late morning hours, OSTK stock is up about 10% in the early afternoon session. Last week, Overstock disclosed its Q3 earnings report to a somewhat mixed performance. Specifically, the retailer posted an adjusted loss of 61 cents per share, paring the expected loss of 83 cents. Unadjusted, the earnings loss came out to $1.39 per share against a forecast of $1.04.
Some of the unadjusted earnings miss stemmed from management’s decision to emphasize kitchen products, the bread and butter of Bed Bath & Beyond. Investors will note that Overstock bought BBBY’s intellectual property. This directive better ensured that Bed Bath & Beyond customers didn’t feel alienated by new ownership.
On the optimistic side, Overstock CEO Jonathan Johnson revealed that Bed customers stayed with the famous brand. Not only that, Overstock experienced a large surge in shoppers that initially did not represent either entity’s customer base.
Nevertheless, Johnson admits that the path ahead won’t be turbulence free, acknowledging tough economic headwinds. Further, the chief exec mentioned that high mortgage rates may impact the housing market. In turn, this factor could negatively affect spending on furniture and rugs.
While Johnson mentioned that people may still spend heavily on the holidays – even if they must use their credit card – this framework presents another problem. Americans collectively hold over $1 trillion in plastic debt.
Why It Matters
According to TipRanks, analysts peg OSTK stock as a consensus moderate buy. This assessment breaks down as two buys, five holds and zero sells. Also, the average price target lands at $22.83, implying over 48% upside potential.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
