Overstock.com Inc. was downgraded to "sell" by Stifel Nicolaus & Co. on Wednesday as the online seller of excess inventory from furniture to children's watches will need to find more capital in order to increase revenue.
Citing second-quarter results that showed a 6 percent gain in revenue and a 155 percent decline in cash operating income, analyst Scott Devitt wrote in a note the company's "fundamentals have actually deteriorated" and it needs a "much higher revenue base to become self-funding and will require more capital."
He said that Salt Lake-based Overstock.com will need more capital to build up its inventories next year.
Devitt, who is based in Baltimore, cut his rating on the Overstock.com shares from "hold." He's had a "hold" rating on the company since December 2005.
On July 28, Overstock.com reported a net loss of $15.7 million in the second quarter as the company spent more to improve efficiency.
Shares of Overstock.com fell 25 cents, or 1.5 percent, to $16.72 Wednesday in Nasdaq Stock Market trading. They touched a 52-week low earlier in the day and have fallen 62 percent over the past year.
Overstock.com has accused a research company and a hedge fund of conspiring to drive down its stock. It filed a lawsuit against Gradient Analytics Inc. for issuing critical reports about the company that have allegedly benefited short sellers and made it difficult for Overstock.com to raise investment capital. Gradient sought dismissal of the lawsuit in late May.