What happened

Shares of Overstock.com (NASDAQ:OSTK) fell 22.8% in October 2020, according to data from S&P Global Market Intelligence. The online home furnishings retailer and blockchain technology researcher published its third-quarter results on Oct. 29, setting off a thrilling roller-coaster ride. Overstock's share prices rose as much as 14.5% that day before reversing course and closing the day 13.6% lower instead.

So what

The earnings report richly deserved the morning's big jump. Overstock's third-quarter sales rose 111% year over year to $732 million, while the bottom line swung from a loss to positive earnings of $0.50 per share. Your average analyst would have settled for a net loss of $0.23 per share on roughly $580 million in top-line sales.

The quick downturn in the afternoon also makes sense when you consider the stock's market-stomping gains in recent months. Overstock entered this earnings report on a 921% year-to-date gain, which set the stock up for a sharp correction if the results were anything less than utterly impressive.

A businessman stands with his back to the camera, contemplating a large question mark at the end of a road named Cryptocurrency.

Image source: Getty Images.

Now what

The third-quarter report was actually very impressive. The tZERO blockchain-based trading platform saw trading volumes grow 20-fold compared to the year-ago period and cryptocurrency prices are generally on the rise, underscoring the potential of Overstock's blockchain technologies. E-commerce sales also doubled year over year, catching on to the broad consumer interest in online shopping during the COVID-19 health crisis.

"The growth Overstock is experiencing has taken and continues to take a lot of work and mental effort to produce and maintain, it is not just COVID produced," said CEO Jonathan Johnson on the earnings call.

At the same time, all of this had arguably been baked into Overstock's share price before the report. It would take a fully functional crystal ball to put a fair value on this interesting but risky stock these days, and mine is in for repairs. Investing in Overstock requires nerves of steel to handle the guaranteed truckloads of volatility along the way.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.