UPDATE: Raymond James Starts Overstock.com (OSTK) at Market Perform
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Raymond James analyst Rick Patel initiates coverage on Overstock.com (NASDAQ: OSTK) with a Market Perform rating.
The analyst comments "We initiate coverage on Overstock (OSTK) with a Market Perform rating. OSTK has executed strongly through strategic and operational improvements enacted by management under CEO Jonathan Johnson (appointed September 2019), who positioned OSTK well to monetize strong demand for the Home category during COVID. Today, levers for long-term growth include: secular trends toward Digital, improving the customer experience, doubling down on the Home category (wider selection), mobile app recruitment, and the loyalty program. While there’s a lot to like, the Home category is under pressure currently as the COVID reopening drives wallet share shifts other categories and services. Inflationary pressure on the consumer, geopolitical overhang, and rising mortgage rates also present uncertainty. Our proprietary consumer survey of nearly 600 people indicates consumers are planning to spend less on their Home in 2H vs 1H. Impressively, OSTK has been able to keep margins stable (GM >22%, EBITDA MSD%) despite total revenue declining 10% Y/Y in 4Q21 and 19% in 1Q22, an indication of good cost and opex control. Valuation is also attractive (EV/Revenue ~0.5x) and we acknowledge the Medici segment presents stock optionality. That said, we expect the stock to reflect trends in the core Home segment, where we seek greater conviction on demand as consumers adapt to a new normal."
Shares of Overstock.com closed at $28.30 yesterday.
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