What happened
Shares of Overstock (BYON 1.27%) continued their upward march on Monday, after a report showed online furniture sales surged in April. Overstock's stock traded as much as 12% higher on the news, and still traded 9% higher as of 3:30 p.m. EDT.
Overstock has attracted the attention of traders hoping for a quick rebound in the price per share. The stock has quintupled since falling below $3 per share in mid-March.
Image source: Getty Images.
So what
Privately-held Blueport Commerce allows traditional furniture retailers to build an online presence. The company announced that online furniture sales on its platform grew 306% in April compared to April of 2019. For perspective, those sales are so strong that they even exceed sales from November 2019, which contained Black Friday, by 81%.
Home goods make up a large part of Overstock's business -- 87% in the first quarter of 2020. Overstock's management echoed Blueport's observations about increased home goods sales, and also noted that new customer growth in April alone increased nearly 250% versus a year ago.
In the span of about four weeks in February and March, Overstock's stock lost more than 70% of its value. But considering e-commerce is growing and home furnishing sales are surging, short-term traders are betting on a quick Overstock rebound. And so far they've been very right.
Now what
To be sure, changes in consumer behavior caused by the COVID-19 pandemic is an opportunity for Overstock. Regarding its business, CEO Jonathan E. Johnson III said on the first-quarter earnings call, "[w]e don't expect it to regress to pre-pandemic levels." That would be good news for Overstock shareholders, especially considering full-year revenue fell 20% in 2019.
While shareholders are celebrating strong sales during the coronavirus, long-term investors can't forget about profits. Overstock hasn't reported a full-year profit by generally accepted accounting principles (GAAP) since 2016, partly explaining why this stock was steadily falling before COVID-19. For those looking for top retail stocks, there may be better options than Overstock.
