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Overstock.com Down 12 Percent on Analyst Downgrade (OSTK)

Shares of Overstock.com (NASDAQ: OSTK) fell more than 12 percent on Wednesday after Bank of America (NYSE:BAC) analyst Nat Schindler downgraded the stock from Buy all the way down to Underperform.

Schindler also lowered Overstock.com’s price target from $23.00 to $20.00. In the note, he said:

 “Although Overstock showed reasonable revenue growth in Q4 (+9%) and strong growth in Q1 (+19%), it is hard to say this is the start of a long term trend for two reasons: 1) Overstock’s recent growth was on top of very easy y/y comparisons (down 10% in 4Q11 and down 1% in 1Q12 vs. overall eCommerce around +15%); and 2) Ovestock’s growth came simply from getting a larger wallet share from fewer customers instead of true volume growth. Customers and orders were slightly down y/y, so more than 100% of the revenue growth came from a 21% increase in average order size. Although much of this is likely better on-site targeting, some of this increase is likely due to price increases supporting the 70bps rise in gross margins. Higher gross margins are positive, but raising prices in the competitive eCommerce market is not usually a winning strategy for growth.”

Prior to today’s move, the stock was up more than 100 percent on the year.

[stock-tools exchange="NASDAQ" symbol="OSTK" image_height="230" image_width="350"]

Disclosure: At the time of this writing, the author had no position in the equities mentioned.

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