High-End Product Focus And Tech Investments Will Redefine Retail Operations

Key Takeaways

• Focus on high-value products and strategic partnerships aims to boost revenue growth and strengthen brand presence.
  
• Technology investments in customer experience and marketing efficiencies are expected to improve conversion rates and enhance net margins.
  
• Restructuring and new strategies create uncertainty, with revenue declining due to SKU reduction, amid marketing execution and macroeconomic challenges impacting margins and profitability.

Catalysts

Operates as an e-commerce affinity marketing company in the United States and Canada.

• Beyond, Inc. anticipates a transition from a restructuring company to a growth company in the next 60 days, with expectations of revenue growth in Q2 and Q3 of 2025 due to a more streamlined and efficient operation. This suggests a positive impact on revenue.
  
• The company is focusing on building the Overstock brand by introducing high-value, high-demand products such as Gucci bags and high-end furniture, and leveraging buybuy BABY to tap into life events, which is expected to drive revenue increases.
  
• Investments in technology and customer experience, including a new direct-to-consumer marketing team and the implementation of Salesforce and blockchain technology, are anticipated to lead to improved conversion rates and marketing efficiencies, potentially enhancing net margins and earnings.
  
• Beyond intends to capitalize on its investment in Kirkland's, leveraging its low-cost, high-margin retail format and potential new store openings to create an omnichannel presence that supports margin improvement and increases potential revenue streams.
  
• The elimination of non-contributory SKUs and vendors, coupled with an increased focus on marketing efficiencies and cost-effective customer acquisition strategies, should enhance gross margins and drive earnings growth.

Beyond Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Beyond's revenue will grow by 3.4% annually over the next 3 years.
• Analysts are not forecasting that Beyond will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Beyond's profit margin will increase from -18.1% to the average US Specialty Retail industry of 4.4% in 3 years.
• If Beyond's profit margin were to converge on the industry average, you could expect earnings to reach $60.5 million (and earnings per share of $0.88) by about May 2028, up from $-224.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 14.6x on those 2028 earnings, up from -1.0x today. This future PE is lower than the current PE for the US Specialty Retail industry at 15.2x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.73%, as per the Simply Wall St company report.

Beyond Future Earnings Per Share Growth

Risks

• The company is still in the process of restructuring and implementing new strategies, which introduces uncertainty about whether these changes will lead to the projected improvements in revenue and profitability.
  
• A significant decline in revenue was noted due to the reduction of non-contributory SKUs and vendors, leading to fewer orders and new customers which might continue to impact revenues negatively until adjustments stabilize.
  
• There is inherent risk with reliance on new marketing strategies and systems integration, which must be executed effectively to prevent wastage of marketing resources and ensure a high return on ad spend.
  
• The company is facing a challenging macroeconomic environment with high interest rates and potential tariff impacts that could exacerbate cost pressures, impacting margins and net earnings.
  
• Despite focusing on high-value product offerings, there is a risk of margin pressure from anticipatory price hikes by vendors and the need for strategic discounting to attract customers, which could limit overall gross margin growth.

Valuation

• The analysts have a consensus price target of $10.2 for Beyond based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $16.0, and the most bearish reporting a price target of just $5.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.4 billion, earnings will come to $60.5 million, and it would be trading on a PE ratio of 14.6x, assuming you use a discount rate of 7.7%.
  
• Given the current share price of $4.15, the analyst price target of $10.2 is 59.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.