Overstock.com shares fell 5.2% on Friday after the online retailer reported declining revenue and provided no substantial update on its potential retail business sale. The stock had plunged as much as 16% intraday before paring losses, closing at $45.70 – marking a 25.2% weekly decline.
Financial Performance
The company reported a 13% year-over-year decrease in Q4 revenue to $456.3 million, with full-year 2017 sales dropping 3% to $1.745 billion. Overstock’s retail segment swung to a $91.6 million net loss, while its blockchain-focused Medici Ventures division reported an $18.3 million loss.
SEO Challenges and Competitive Pressures
CEO Patrick Byrne attributed part of the sales decline to a significant drop in search engine traffic, potentially caused by Google’s algorithm changes implemented in May. Search traffic previously accounted for 40-45% of the company’s business.
“Our SEO collapsed and it’s especially confusing because we’ve always been great with Google,” Byrne said during the earnings call.
Retail Business Sale Status
Overstock confirmed ongoing discussions with Guggenheim regarding strategic alternatives, including a potential sale of its e-commerce assets. This follows Byrne’s December statement anticipating a deal within three months.
D.A. Davidson analyst Tom Forte reduced his price target by $10 to $100, citing lowered valuation for the e-commerce business, while maintaining his buy rating based on expected value from Medici Ventures’ blockchain portfolio.
Regulatory Scrutiny
The company disclosed details about an SEC investigation into its tZero subsidiary’s $250 million security token offering. Overstock stated it intends to cooperate fully with the SEC but warned the investigation may divert resources from business operations and capital-raising efforts.
The SEC has recently increased scrutiny of cryptocurrency-related companies as part of its efforts to combat fraudulent activity in the digital asset space.
Cryptocurrency Holdings and Outlook
Byrne highlighted Overstock’s cryptocurrency investments, including approximately 60 million Ravencoins (valued at 2.46 cents each as of Friday). While acknowledging a challenging first quarter, the CEO expressed optimism about progress in Q2.
“Quarter one is terrible,” Byrne said. “I think you’ll see us making nice progress in quarter two.”
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