Why Overstock Shares Sank 40% in March

MarketsMotley Fool

What happened

E-commerce specialist Overstock (NASDAQ: OSTK) badly trailed the market last month, plunging 40% compared to a 3% decrease in the S&P 500, according to data provided by S&P Global Market Intelligence.

Continue Reading Below

That slump still left shares up by more than 100% over the last 52 weeks.

So what

March's decline followed a fourth-quarter earnings report that wasn't well-received by investors. Revenue fell 13% over the critical holiday shopping period, Overstock revealed, which led to a slight decrease for the full fiscal year. Marketing expenses continued to climb, though, which pushed contribution margin, a measure of profitability, down to 7% of sales from 10% a year ago.

Now what

In response to the poor market share trends, Overstock executives said the company is shifting strategies to aim for high growth at the expense of growing losses. The move should allow the business to recapture ground lost to competitors like Wayfair, if you believe the management team. "We have already turned on the jets," CEO Patrick Byrne said in a press release, "and will demonstrate this year that our growth engine is far more efficient" than Wayfair's.

Given the mounting losses that could be in store in 2018, and the uncertain impact on sales growth, it's no surprise that investors are taking a more cautious view of Overstock.

10 stocks we like better than Overstock.comWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Overstock.com wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of April 2, 2018

Demitrios Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends W. The Motley Fool has a disclosure policy.