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Why Overstock.com Sank 12% Today

By Howard Smith – Aug 27, 2020 at 4:38PM

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A new rapid COVID-19 test has investors reversing the stay-at-home trades.

What happened

The share price of online retailer Overstock.com (OSTK 3.13%) dropped 17% earlier today, before closing down just over 12%. And the reason may have nothing directly to do with the retail sector. 

So what

Overstock.com is one of the companies that has benefited from the impacts of the coronavirus pandemic. Americans who have been stuck at home have been spending money to spruce up and improve their living spaces. Like Home Depot (HD 1.51%), Lowe's (LOW -0.02%), and Target (TGT -0.02%), Overstock.com has seen sales jump during the stay-at-home phase of the pandemic. 

room with modern home furnishings with dog on the couch

Image source: Getty Images.

In its second-quarter report for the period ending June 30, the company reported sales more than double those of the prior-year period. But today's news that Abbott Laboratories (ABT 0.89%) received emergency use authorization for its rapid COVID-19 test has investors taking profits and buying the "reopen" stocks like airlines and cruise operators instead.  

Now what

Overstock CEO Jonathan Johnson commented after the second-quarter earnings release, "Importantly, our customers are buying our core products -- home furnishings -- from the safety of their homes as part of the country's new normal." 

But investors have already benefited from that surge in business. Even with today's drop, shares are up more than 1,200% in 2020. That's the kind of gain that has some investors wanting to take profits when there is any news of a potential shift in consumer behavior. 

Howard Smith owns shares of Home Depot. The Motley Fool owns shares of and recommends Home Depot. The Motley Fool recommends Lowe's and recommends the following options: long January 2021 $120 calls on Home Depot and short January 2021 $210 calls on Home Depot. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Overstock.com Stock Quote
Overstock.com
OSTK
$25.39 (3.13%) $0.77
Home Depot Stock Quote
Home Depot
HD
$326.38 (1.51%) $4.87
Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$106.96 (0.89%) $0.94
Target Stock Quote
Target
TGT
$163.38 (-0.02%) $0.03
Lowe's Stock Quote
Lowe's
LOW
$210.97 (-0.02%) $0.05

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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