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Why Overstock.com Stock Skyrocketed 165.9% in July

By Keith Noonan – Aug 5, 2020 at 9:38AM

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The online retail company's share price has jumped more than 1,000% this year.

What happened

Shares of Overstock.com (OSTK -2.72%) soared 165.9% in July, according to data from S&P Global Market Intelligence. The e-commerce company's valuation climbed due to favorable analyst coverage amid data suggesting strong momentum for online retail sales, and the stock saw a pronounced late-month jump after the company published its second-quarter results.

^SPX Chart

^SPX data by YCharts

Overstock published second-quarter results on July 30, posting sales and earnings for the period that crushed the market's expectations. The company recorded earnings per share of $0.84 on sales of $782.5 million, while the average analyst estimate had called for a per-share loss of $0.23 on revenue of $680.2 million.

A smartphone displaying a shopping cart icon.

Image source: Getty Images.

So what

DA Davidson analyst Tom Forte published a bullish note on Overstock on July 2 that helped spur momentum for the company's share price in the month. Forte's note maintained a buy rating on the stock and raised DA Davidson's one-year price target on the company's shares from $33 to $66. The analyst cited Overstock's solid fundamentals, potential in the company's digital securities trading platform, and tailwinds related to the coronavirus pandemic as core reasons for hiking the price target.

Overstock's valuation continued to climb leading up to its Q2 earnings release and then saw a substantial jump after the company posted its results. Revenue climbed 109% year over year in the period to set a new record, and net income for the period came in at $36 million -- a dramatic improvement compared to the $27 million loss it posted in the prior-year period. 

Now what

Overstocks' share price has continued to climb early in August's trading. Shares are up roughly 9% in the month so far.

^SPX Chart

^SPX data by YCharts

Overstock had previously considered selling its e-commerce business, but CEO Jonathan Johnson has now stated that he has no interest in going forward with such a move. The online retail business is looking stronger thanks to tailwinds spurred by COVID-19, and the company's tZERO platform for trading digital securities is also generating excitement. 

Overstock now has a market capitalization of about $3.3 billion and trades at roughly 1.6 times this year's expected sales.

Keith Noonan 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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