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Is Overstock overvalued?

Posted Oct 22 2007, 01:36 PM by Kim Peterson
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Overstock.com is getting lots of market love today, with shares up 7% after solid earnings news on Friday. The company's quarterly loss of 20 cents a share was way better than the 39 cents a share analysts had been expecting.

Shares have seen a huge runup over the past year, going from $13.50 last November to about $34 today. I don't think Overstock has proven itself enough to justify such a high share price. The company has a history of bad decisions and other drama, and investors should wait before making the plunge.

Piper Jaffray upgraded the stock today to Market Perform from Underperform and raised its target from $16 to $31. Other analysts have not been so kind; Stifel Nicolaus lowered its rating on the company last week to Sell from Hold, saying the shares are fully valued. No analyst has a "buy" on Overstock.

Overstock sells excess inventory online. I've never had the patience to sift through the site's pages, looking for things that couldn't sell in other stores. And the prices aren't much less than what you can find elsewhere.

Overstock had some problems in the quarter. The number of new customers fell 10% from the year-ago quarter to 484,000. And the number of unique customers dropped 2% to 1.1 million. On the other hand, the average order size rose 15% to $118 and Overstock's gross profit per transaction rose 32% to nearly $20.

The fourth quarter is the most important of the year for Overstock, and this one seems even more crucial. By early next year we should have a better sense of whether this company's turnaround is permanent.

Comments

 

wow...I'd suggest any investors try Overstock as a customer PRIOR to making an investment.  I was a regular customer, but consistent dismal customer service, and dissapointing purchases drove me away.  

In my opinion Overstock intentionally hypes product descriptions...and even deceptivly alters photograph colors...  overpromise, under deliver is not a good business practive!

I have bought about 23 watches from them. Great prices and never a problem. They have super deals if you LOOK for them.

"I've never had the patience to sift through the site's pages, looking for things that couldn't sell in other stores. And the prices aren't much less than what you can find elsewhere."

Wrong.  I have the patience and have sifted through their pages and obtained plenty of good deals often.  The writer of this article should perhaps actuallyuse the search engine rather than "sifting."  

Probably the analyst are right about the viability of the stock as internet companies have a notorious history of not living up to the hype and promise that the sellers overstate.

Nevertheless the reporters article was disappointing more than Overstocks stock.

I never have liked Overstock, personally. I had bad experience with their customer service, or lack thereof.

I disagree with the author, if she does not have the patience to look she should not make comments. I recently bought 2 sets of NEW golf clubs (irons) valued at $499 at a discount sporting goods store for $199 per set. Seams like a bargin to me. Click on Sporting goods and gold clubs --not that difficult.

Not my favorite site.  They have awful customer service. Took forever to get shipping documents and a credit. I had to call multiple times for both.

Excellent piece of writing.

Use an inflammatory question as a way to get people to actually give a damn about your article, when actually you are doing nothing but regurgitating some history someone gave you and reciting the quarterly report.

But hey! Thanks for the link to the quarterly report, and thanks for not making us wonder if your an idiot!

I am a regular Overstock customer and have never had any bad experiences with any of my orders.  They are fast w.r.t. delivery, and their customer service, especially theiir customer service online chat is indeed outstanding.  Overstock does value regular customers, which is important to me.

I too have had great success on overstock.  I think those of us that comparison shop are capable of finding bargains.  You DO have to comparison shop, because 50% of the time you can find the exact item less elsewhere.  On the other hand, 50% of the time you get a great deal.  I have only had 1 overstock issue, and the customer service was great providing a no hassle refund/exchange with superior follow up.  You CANNOT beat their shipping prices and coupon frequency either.  Know what you want, compare like a thrifty consumer,  and you will end up sitting pretty.  (I think those that sift and who are displeased with overstock are not thrifty shoppers to start with.  It wasn't designed for mall shoppers-or those with personal shoppers -it was designed for the conscientious consumer checking out everything to make an informed decision before making a purchase)

I have never found any merchandise worth anything or that I could not find I many other places on web...I think it is a niche deal and I do not fit-wish them well...

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