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Overstock (OSTK) Down 5.8% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Overstock.com (OSTK). Shares have lost about 5.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Overstock due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Overstock.com’s Q4 Earnings and Revenues Miss Estimates

Overstock.com reported fourth-quarter 2022 loss of 4 cents per share, which missed the Zacks Consensus Estimate profit of 3 cents per share and declined 111.1% year over year.

Revenues of $404.9 million decreased 33.9% year over year. The top line lagged the consensus mark by 13.2%.

The revenues were hit due to discounting activities by old and new competitors, the management’s strategic decision to remove non-home products from their site and the contraction in demand in the real estate sector.

Active customers reached 5.162 million at the end of the fourth quarter of 2022, down 36.1% year over year.

The number of active customers declined due to decrease in home related spending, change in spending preference and company’s transition to 100% online home retailer.

The average order value was $215 in the reported quarter, increasing 4.4% year over year. However, orders delivered were 1.882 million, down 36.7% year over year.

Operating Details

Gross margin contracted 60 basis points (bps) to 22.1% in the reported quarter.

Sales & marketing (S&M) expenses decreased 33% year over year to $45.5 million. As a percentage of revenues, S&M expenses increased 20 bps to 11.2%.

Technology expenses were $27.9 million, down 9.7% year over year. As a percentage of revenues, technology expenses jumped 180 bps on a year-over-year basis to 6.9%.

General & administrative (G&A) expenses decreased 10.3% year over year to $18.7 million. As a percentage of revenues, G&A increased 120 bps to 4.6%.

Adjusted EBITDA was $6.5 million, which declined 76.2% from the year-ago quarter.

Operating loss was $15.5 million compared with $32.9 million profit reported in the year-ago quarter.

Balance Sheet

As of Dec 31, 2022, Overstock had cash and cash equivalents worth $371.263 million compared with $427.530 million as of Sep 30, 2022.

Long-term debt, as of Dec 31, 2022, was $34.476 million compared with $35.369 million as of Sep 30, 2022.

During the three months that ended Dec 31, 2022, Overstock repurchased $20 million of its common stock.

As of Dec 31, 2022, Overstock had approximately $19.9 million remaining under the current repurchase authorization.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -231.21% due to these changes.

VGM Scores

Currently, Overstock has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Overstock has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

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