With retail stores closed for large portions of 2020, many people shifted to making online purchases, sending the likes of Amazon’s (NASDAQ: AMZN) share price soaring.
Many companies in this space look expensive for investors. However, the one online retailer I’m investing in right now is Overstock (NASDAQ: OSTK). This online retailer focuses mainly on furniture and homeware, but also has some exposure to the cryptocurrency and blockchain spaces. It has been going from strength to strength and a lot more growth appears to be on the way.
A look at Overstock’s financials
Overstock reported its Q1 2021 earnings on April 29. On the back of good earnings figures, its share price rose by about 10%. Revenue for the period increased 94% year-on-year to $660 million. It also had about $535 million in cash at the end of the quarter and net income of $16.1 million.
Overstock’s momentum from 2020 has clearly carried over into this year. The company’s active customers almost doubled year-to-year to 9.9 million during Q1. Other key metrics like net revenue per active customer, orders delivered, and average order value all increased. Management is confident of this strong performance continuing through 2021 and into the future.
What I like about Overstock
Overstock has been around since the late 1990s and has successfully come through numerous bubbles and crises. Clearly, it has learned how to survive and adapt over the years. This alone is comforting for those people who have concerns about the longevity of some companies in this space. It also has not been setting itself unrealistic targets. Overstock has managed to consistently meet expectations and executing on its promises.
Another area of interest is the digital currency and blockchain angle. Overstock was one of the first online retailers to accept Bitcoin as a form of payment, doing so in 2014. It reportedly has a large holding of the biggest cryptocurrency, likely benefitting from significant price gains in recent times.
The digital currency space is very speculative, but the Overstock CEO Jonathan Johnson is confident in its exposure to this sector. He believes that its tZero platform could become the go-to trading platform for many investors, taking on the likes of Coinbase and Robinhood. It focuses on a wide range of different assets, from crypto to NFTs, digitized securities, and stocks. Many investors are now seeing Overstock as a way to get some exposure to the crypto industry.
Risks to Overstock’s share price
There will be the concern that Overstock’s share price is at its ceiling. It has increased by more than 385% in the past year. There has been a lot of volatile price action in this period, which is not ideal for more conservative investors.
A reason for this volatility is likely down to the company’s exposure to the cryptocurrency space. Overstock has some significant crypto investments and this sector is very volatile.
Another concern is that as the world comes out of the pandemic, people will spend less time at home. This could lead to slowing sales for the furniture and homeware-focused online retailer. Finally, its numbers still aren’t on par with many competitors in the space, so investors are paying for potential future growth.
Overstock’s growth potential
As an investment, Overstock is a more speculative play. Its growth potential is what is appealing to investors. With active customers and revenues nearly doubling year-on-year in Q1, the online retailer is regularly exceeding expectations.
While it might not be the biggest online retailer, the crypto side of the business creates intrigue. This is especially the case as growth in the retail business will likely slow as we emerge from the pandemic.If the digital currency space continues to grow and become more mainstream, Overstock could be well-positioned to take advantage. This is a key reason why many market analysts are bullish and have set a median price target of $120 for this stock.
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Contributing Writer at MyWallSt
Andrew is a contributing writer to MyWallSt. He is a full-time finance writer, having spent time working in the industry. He studied Economics and Finance and has been fascinated with the financial markets since his teens. The first stock that Andrew bought was Apple, reflecting his love for its products.