Overstock.com Inc.'s shares fell Wednesday after an analyst said the company's strong first-quarter results were surprising but that the discount online retailer still needs to show it can drive maintainable, profitable growth.
Overstock shares fell 20 cents to $17.29. Earlier, the shares traded as low as $16.72.
In a note to clients, Canaccord Adams analyst Domenic LaCava maintained his "Sell" rating for the stock, citing its need for a sustainability plan and inflation of the share price following first-quarter results.
"While upside first-quarter results significantly exceeded our and Street estimates, a single quarter of upside year-over-year growth following two consecutive dismal years does not validate sustained traction with the model, in our view," he said.
The analyst said Overstock's issues include whether it can maintain growth in line with or better than the broader e-commerce sector, if and when it can experience profitability against this growth and whether it can compete with eBay Inc. and Amazon.com Inc. in the long term.
LaCava also raised his 2008 and 2009 estimates for Overstock and, accordingly, increased his price target to $11 from $7.
He said that in a Tuesday conference call the company "implied aggressive guidance including potential to reach 30 percent revenue growth in (the second quarter) and GAAP profitability in 2008."
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