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Overstock Shares Tumble on Upbeat Earnings Report. Here’s Why.

The Overstock.com fulfillment center in Salt Lake City, Utah.

Daniel Carde/Bloomberg

Overstock.com is tumbling early Wednesday, despite delivering an upbeat fourth quarter, as investors questioned if the pandemic winner can sustain its rally.

Overstock (ticker: OSTK) said Wednesday morning that it earned $13 million, or 26 cents a share, up from a 71-cent-per-share loss in the year-ago period. Revenue rose 84.4% to $684 million. Analysts were looking for EPS of 21 cents on revenue of $670 million.

Overstock was down 12.9%, at $76.77, in recent trading. The S&P 500 was up 0.6%.

There were a lot of good points in the quarter: Year-to-date net cash turned positive to $196 million, while adjusted free cash flow climbed $281 million year over year. In addition, newly acquired customers in the fourth quarter increased 94% from the year ago-period.

That said, a look at Overstock’s stock performance shows why investors may have been looking for an even bigger earnings blowout: The shares are up nearly 84% just since the start of 2021, and have soared 1,105% in the past 12 months.

That huge rally was fueled by the company’s pandemic gains. Covid-19 led to more time at home for most people, and with few other outlets for discretionary spending, consumers bought up home furnishings online in droves—raising expectations for Overstock after its big run. The shares also tumbled after its third-quarter earnings report, even as it too handily beat analysts’ estimates.  

When it comes to pandemic beneficiaries, investors have been increasingly focused on whether or not companies can maintain their momentum even as widespread vaccination promises some sort of return to normal later this year.

“Our mantra in 2021 is sustainable, profitable, market share growth. I am confident we will achieve it,” said CEO Jonathan Johnson in the press release. Investors may have been hoping for more concrete commentary about how the company plans to maintain sales growth as it faces difficult 2020 comparisons.

Write to Teresa Rivas at [email protected]

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