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Overstock Retail Unit, No Longer on Sale Block, Fuels Gain

Bloomberg logoBloomberg 6/23/2020 Jeran Wittenstein and Ryan Vlastelica

(Bloomberg) -- Inc. became a household name as an e-commerce pioneer, but in recent years excitement in the investment community was focused more on the company’s blockchain efforts. The pandemic has changed all that.

With demand from online shoppers soaring, sales at Overstock’s retail business have helped transform a moribund stock to one of the Covid-era’s best performers, an irony for a unit that had long been considered for sale. Overstock shares have gained nearly 11-fold since closing at a record low on March 16, vaulting the company into the top five stocks in the Nasdaq Composite Index over that period. With virus cases on the rise again in the U.S., that trend is showing no signs of slowing.

“This is an e-commerce pandemic play on steroids,” said Tom Forte, an analyst at D.A. Davidson. He is one of the few analysts on Wall Street to track the stock, which gained another 5% on Tuesday.

a screenshot of a cell phone: Overstock has rallied almost 1,000% since March 16 © Bloomberg Overstock has rallied almost 1,000% since March 16

Overstock’s revival is the latest turn in the company’s tumultuous history, which until last year took place under the leadership of founder Patrick Byrne. Byrne stepped down as chief executive officer after disclosing a tryst with a Russian operative in conspiracy-tinged statements. More recently, Overstock’s first-of-its kind digital dividend has added another element of controversy with the company insisting trading in the dividend take place on its tZERO venue.

Byrne was an early devotee of cryptocurrencies and steered Overstock into blockchain investments that helped briefly send the stock soaring in late 2017 at the height of cryptocurrency mania, which downgraded the importance of the retail business in the minds of some investors.

The growth in online shopping has changed that calculus, and CEO Jonathan Johnson said he has “no interest” in selling the e-commerce business. Last month, Overstock said retail sales had more than doubled in the second quarter on booming demand for furnishings from customers confined to their homes. The trend of strong sales has continued in June and with new customers flocking to Overstock the company is confident it can continue to gain market share, Johnson said in an interview.

“It’s going to be a long time before people go back to showrooms to look at home furnishings,” said Johnson, who has led Overstock since August. “I think there will have been a significant shift in people’s comfort level of buying home goods online.” The company is expected to report second-quarter financial results sometime in August.

The Overstock rally is an extreme example of a trend that has been seen broadly across e-commerce stocks over the past few months, especially in decor and home improvement. Analysts have said the increased demand for shopping online -- which Baird estimated could represent a $200 billion annual tailwind -- could be a permanent shift in consumer behavior.

“Fundamentally, e-commerce remains on a tear,” wrote Marvin Fong, an analyst at BTIG, who noted that trends were holding up even as parts of the country reopen. “Even if local governments lift restrictions, fear of a resurgent level of infections could keep consumers staying at home and buying from their computers throughout the summer and possibly longer.”

Among other winners, Wayfair Inc. is up nearly 800% from a March low and analysts expect more gains. Inc. is up more than 60% from a recent low, while EBay Inc. has climbed nearly 90% and both Etsy Inc. and Fiverr International have more than tripled. Chewy Inc., an online retailer of pet products, is up about 120% from a March low. All are at or near record levels, as is the Amplify Online Retail ETF, an exchange-traded fund that has nearly doubled since March and which has seen its strongest two months of inflows since 2018, according to data compiled by Bloomberg.

(Updates shares in second and third paragraphs.)

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