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Overstock.com is scheduled to report third quarter 2008 results
before the market opens on Friday, October 24. Based on our
analysis, we at
eChristianInvesting are expecting OSTK to report
disappointing results that miss Wall Street’s consensus
expectations.
Analyst
Expectations
We are
forecasting revenues of $185 million and EPS of ($.43). This
would represent a 14% increase in revenues from last year’s $162
million in the same period. The current analyst consensus calls
for revenues of $189.5 million and ($.26) EPS. The company has
issued no guidance.
We believe
the current economic environment will be challenging for
eCommerce, especially for business models tied to discretionary
consumer spending.
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The
current macroeconomic climate is proving difficult for most
retailers. Both eBay and Amazon lowered their guidance
forecasts citing difficult economic conditions.
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Overstock.com has failed to establish itself with customers
and website traffic seems to have flattened out.
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Overstock continues to be unprofitable and with consumers
cutting back on their discretionary spending, we don’t see
the company attaining profitability in the foreseeable
future.
In fact,
we now believe that it will be difficult for Overstock.com to
survive this economic recession in its current form. The
majority of the value in its share price seems to be based upon
a potential takeover by a larger, better funded rival (e.g. Ebay,
Amazon).
Share
Performance
To date,
Overstock’s shares are down 30%. However, the real story is the
50% drop in their shares over the last month in a half.
Valuation
Shares are
now trading at 0.2x consensus 2009 revenue estimates. Our belief
is that these estimates will probably continue to be revised
downwards in the coming months to better incorporate the macro
concerns facing online retailers. WE see very limited upside in
the near term for OSTK and believe that the company will
struggle to even survive the current economic downturn.
Therefore, we only recommend these shares as a speculative play
on the potential of a possible takeover.
Recommendation:
Sell.
At the time this article was published, the author did not have
a financial position in any of the stocks mentioned in this
article.
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Disclosure Policy |
