Piper Jaffray Downgrades Overstock.com

Analyst Aaron Kessler says growth appears to be slowing due to more pronounced seasonality

Piper Jaffray downgraded Overstock.com (OSTK ) to market perform from outperform.

Analyst Aaron Kessler says growth appears to be slowing due to more pronounced seasonality. He cut his $150 million second-quarter revenue estimate to $140 million, vs. the consensus estimate of $148 million; he now sees 24 cents second-quarter loss per share, vs. previous estimate of a 21-cents loss.

Kessler believes second half estimates may be too high as well; he notes Overstock.com recently reinitiated its $1 shipping promotion, which he thinks could indicate third-quarter sales are off to a slow start. He also notes that Overstock.com's continued IT investments could further pressure margins in 2005.

He cut his EPS estimates from 52 cents for 2006 to 42 cents, and $1.45 for 2007 to $1.30. He reduced his $48 target price to $39.

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