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Why Shares Jumped Today

By Anders Bylund – Jul 2, 2020 at 3:44PM

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The e-commerce and blockchain specialist received a glowing analyst report based on the rapidly improving retail business.

What happened

Shares of (OSTK 0.78%) rose as much as 12% on Thursday. The online retailer and blockchain technology developer enjoyed a rave review from analyst firm DA Davidson.

So what

Davidson analyst Tom Forte maintained his buy rating on Overstock's shares but doubled his target price from $33 to $66 per share. The analyst's sum-of-the-parts stress tests showed that the e-commerce division should be worth approximately $42 per share on its own, and the blockchain family of businesses could add up to $21 per share. Overstock's cash reserves and physical assets account for the remaining $3 per share.

A close-up of a computer keyboard with a shopping cart icon on one key

Image source: Getty Images.

Now what

The main driver of Forte's boosted value view comes from the e-commerce sector, whose value rose to $42 from $9 per share in his previous analysis. Surging online retail trends due to the COVID-19 pandemic played a part in this upgrade, but so did Overstock's revamped business plan under new management and a large contract with the federal government. Forte even argued that his price target might be too conservative since Overstock's peers in the e-commerce sector typically trade at far richer price-to-sales multiples.

One bullish analyst is not the same thing as a successful turnaround story, but DA Davidson's rosy view is joining a growing Greek chorus here. Overstock's shares have gained a thrilling 375% so far in 2020 and an even sharper 1,230% from the market bottom in March.

Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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