Overstock.com (OSTK) PT Doubled to 'Street High' $66 at DA Davidson on SOTP; Retail Now Worth $42 vs. $9 Previously

(Updated - July 2, 2020 8:59 AM EDT)

DA Davidson analyst Tom Forte raised the price target on Overstock.com (NASDAQ: OSTK) to a 'Street High' $66.00 (from $33.00) while maintaining a Buy rating. The target increase following a stress test of the firm's sum-of-the-parts valuation.

The firm's new $66 price target includes: 1) $42 per share for its namesake retail business (up from $9), 2) $19 for tZERO (unchanged), 3) $2 for its Medici Ventures' portfolio ex-tZERO (up from $1), 4) $2 per share in net cash (unchanged), and 5) less than $1 for its building (versus $1).

On retail, the analyst commented: "Our retail valuation is based on one turn for our new 2020 sales forecast, up from our prior quarter turn multiple on our prior projection. We believe the change is warranted given: a) the improvements management has made to the business (independent of COVID-19), b) the surge in sales trends because of COVID-19 (120% sales growth in April and May and strength into June), and c) more recently, the government contract it won (a $6B annual spend, while recognizing it was one of three providers selected, along with Amazon and Fisher Scientific). Further, when considering the valuations for other e-commerce players managing surges in demand from COVID-19, including its closest peer Wayfair (which, according to Capital IQ, trades at more than 1.6x EV/Sales), should Overstock be able to further exploit the opportunity and emerge with faster sales growth than we are currently forecasting, we see the potential for upside to our one-turn multiple."

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