Overstock.com seemed to have nabbed the hottest deal of the summer when it bought Bed Bath & Beyond’s brand out of bankruptcy. But as the weather cools, fears that the deal was too good to be true have started bubbling up.
At the time, the move was seen as a slam dunk. The stock surged 76% from the day the company disclosed its bid on Bed Bath & Beyond to Aug. 1, the day the name change went through. Fong initiated coverage on Overstock with a Neutral rating Thursday. He doesn’t have a price target on the shares. The stock dipped 0.6% to $17.85 Thursday.His biggest concern is that Bed Bath’s core furniture and home furnishings operation competes more directly with the titans of retail– Amazon.com , Walmart and Target —than Overstock did. These companies also offer conveniences, such as same-day delivery or in-store pickup in store, that Overstock doesn’t have.
The company’s leadership team has said that these initiatives will weigh on profitability in the near term, but Fong worries it will take more time for the efforts to pay off.