Move Over eBay, & Look Out Amazon
Move over eBay, and take notice Amazon.com - you’re not the only internet-retailing game in town anymore. Oh, your dominance in the online-auction and e-tailing spaces (respectively) are still intact - for now. If you think you’re impervious though, you should know that Overstock.com (NASDAQ:OSTK) just posted its first full-year profit.,,, $0.55 per share.
And investors, despite the 34% gain we’ve seen the stock make over the past three days, there’s still upside left. In fact, the stock was trading at more than twice its current valuation two years ago, when the company was nowhere near being profitable.
Best of all, the odds are strong those numbers will continue to be enhanced.
How’d they do it?: And how exactly dies one beat eBay.com (NASDAQ:EBAY) and Amazon.com (NASDAQ:AMZN) at their own game? That’s a great question, and a lesson investors should keep in mind for future reference.
The answer is…. Overstock didn’t beat Amazon and eBay at their own games. Overstock made up its own game.
Eventually, all competitions are boiled down to a two-horse race…. the clear winner, and a distant second rival (if that). It would be virtually impossible to unseat eBay.com as the online auction leader. It would be equally difficult to replace Amazon.com as the leading online book and electronics marketplace (the online selling arm is still pretty tepid).
So how did Overstock.com crack the glass ceiling? By doing what eBay and Amazon don’t. Overstock specifically focuses on selling…. you guessed it, overstocked inventory, fronting for manufacturers needing a venue that can handle bulk shipments and big tickets. Amazon.com and eBay just can’t do that all that well.
It’s all relative: But aren’t Amazon’s revenues 30 times those of Overstock’s, and doesn’t eBay sell 40 times as many items? Yes to both counts – Overstock’s revenue totaled just under $1 billion last year. But, EBAY and AMZN investors are also splitting their share of revenues and profits with 30 to 40 times more investors… at least.
With OSTK, a fairly small investment can own a relatively large chunk of the company’s $450 million market cap. And, if the analysts are right about 2010’s earnings per share forecast of $0.73 – and they’ve been guessing low lately – Overstock.com may be a much more attractive growth prospect for the foreseeable future than eBay or Amazon are.
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