Categories AlphaGraphs, Interviews, Retail

Overstock is an e-commerce stock with strong growth potential. Here’s why

Management expects the tie-up with Pelion Venture Partners to help maximize the value of Medici Ventures’ blockchain assets

For Overstock.com Inc. (NASDAQ: OSTK), 2020 was a surprisingly good year, as the e-commerce platform performed well on all fronts including customer wins and earnings, often defying the market’s prediction. Like in the case of most retailers, the business benefited significantly from the shift in shopping behavior during the pandemic – with many customers taking up home improvement tasks after the shelter-in-place orders came into effect.

The Utah-based retailer mainly sells home décor and furniture through operating segments named Retail, tZERO Group, and Medici Ventures. It also offers products from third-party sellers and pursues financial applications of blockchain technologies through the tZERO brand. In recent years, the majority of the revenue came from the retail business. The company came into existence in 1997 and its initial website was launched in March 1999.

Growth Formula

In an interview with AlphaStreet, Overstock’s chief executive officer Jonathan Johnson said the management’s strategic initiatives for 2021 include the improvement of onsite search and taxonomy, expansion into Canada, establishment of government business, and improving the enterprise platform. Sufficient capital will be earmarked for such efforts so as to achieve sustainable and profitable market share growth.

“With millions of new customers who shopped on Overstock in 2020, we will also be focused on customer retention efforts like improving our customer loyalty program and adoption of our mobile app,” he said.

Shopping Boom to Stay

Johnson’s views on the recent change in customer behavior are somewhat mixed. While ratifying the continuing relevance of brick and mortar shopping options, he believes the adoption of online shopping would stay because consumers became more and more confident and comfortable with it during the shutdown.

Overstock Q4 2020 earnings infographic

According to Johnson, people have been enjoying the convenience and ease being offered by e-commerce platforms since last year. “It’s not a question of whether customers will continue to purchase furniture, it’s a question of where they will make those purchases. That is increasingly online,” he told AlphaStreet.

Expanding Partner Network

Looking ahead, the CEO sees continued expansion of the partner network, comprising about 3,000 suppliers that ship from more than 4,000 warehouses. Also, existing partnerships with third-party technology vendors will be fostered for expanding the e-commerce business. For instance, the recently announced tie-up with Pelion Venture Partners would help maximize the value of Medici Ventures’ blockchain assets as the arrangement offers the best opportunity for Medici Ventures’ companies to have successful economic outcomes.

The COVID-driven spike in demand for home improvement and the booming housing market bodes well for the company as far as future growth is concerned. The long-term prospects would also depend on tZERO’s ability to improve the top-line and generate profit. The bright spot is the growing popularity of digital currencies and elevated demand for blockchain technology. Meanwhile, there are concerns that the COVID-driven boom is temporary and sales would slow down once normalcy returns to markets.

Stock an Attractive Bet

The stock entered 2021 on a high note and maintained the uptrend until a few weeks ago. But it slipped below the $70-mark last week despite Overstock reporting a sharp increase in sales to $684 million for the final months of 2020. Consequently, the company swung to a profit of $0.26 per share from last year’s loss of $0.73 per share. However, analysts were looking for better performance, given the positive demand conditions. The current target price represents a 69% upside, which makes the stock an attractive bet.


Read management/analysts’ comments on Overstock’s Q4 results


At $67.66, the shares traded down 7.35% on Tuesday afternoon. Still, it is up 42% since the beginning of the year.

Looking for more insights?

Read the full conference call transcript here. It’s free!

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