On Thursday, Piper Sandler adjusted its outlook on Beyond Inc. (NYSE:BYON), reducing the price target to $26 from $27 while sustaining a Neutral rating on the company's shares. The revision reflects a tempered expectation for the company's first-quarter sales growth, now anticipated to be around 1%, a significant drop from the previously projected 10%.
The analyst from Piper Sandler attributes this change to the delayed relaunch of Overstock (NYSE:BYON), which did not generate substantial advertising buzz. Consequently, the forecast for Beyond Inc.'s first-quarter revenue has been set at $385 million, falling short of the consensus estimate of $393 million.
The firm also revised its EBITDA expectations for Beyond Inc., moving from a previous estimate of -$47 million to -$52.5 million, which contrasts with a more optimistic consensus projection of -$38 million. This adjustment comes amidst the company's ambitious $2 billion revenue goal for 2024, which depends on a few key strategies.
These include maintaining momentum in BBBY.com sales, reintroducing non-home products like jewelry to Overstock (a category that previously generated $130 million to $160 million before being discontinued in 2022), and the relaunch of Zulily, which was acquired in the first quarter and had reported revenues of $900 million in 2022.
Despite these initiatives, Piper Sandler remains cautious about Beyond Inc.'s ability to meet its revenue targets, expressing skepticism over the company's potential to significantly boost Overstock and Zulily sales.
The analyst also expressed concerns regarding the company's profitability trajectory and how sales might trend in the fourth quarter of 2024 and into early 2025, especially as the impact of large promotions for BBBY is normalized.
The core investment thesis for Beyond Inc. is that the company presents an interesting turnaround opportunity. However, there are reservations about the need for substantial advertising investment to jump-start sales growth for the BBBY, Overstock, and Zulily brands, following years of sales decline. The analyst underscored the management's heavy incentivization based on aggressive sales growth targets for the next three years but questioned the likely profitability in the scenario where the company aggressively pursues these revenue goals. To date, Beyond Inc. has not demonstrated a sales growth acceleration that is accompanied by improving margins. The lowered price target is based on a valuation of 0.5 times the enterprise value to projected 2024 sales.
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