Bidz.com (BIDZ) is scheduled to report third quarter 2008 results after the market closes on Monday, November 10. Based on our analysis, we at eChristianInvesting are expecting BIDZ to report better than expected results that beat Wall Street’s consensus expectations.
We are forecasting revenues of $56.4 million and EPS of $.11. This would represent a 41% increase in revenues from last year’s $40.1 million in the same period. The current analyst consensus calls for revenues of $55.9 million and $.11 EPS. On August 5, the company raised their third quarter guidance to revenues of $55 – 58 million and $.10 - .11 EPS.
Bidz was one of the star performers of the last earnings season – posting 40% y/y growth that exceeded analyst expectations and the company’s own guidance. While the economic conditions have clearly deteriorated in recent months, we believe that Bidz is one of the few retailers that could stand to benefit as consumers become more cost-conscious. As the holiday season gears up, we expect to see strong traffic and customer growth for both Bidz.com and Buyz.com.
To date, Bidz’s shares have fallen 33%. By comparison, the Dow Jones industrial average has fallen 31% this year, and the Standard & Poor's 500-stock index is down 35%.
Shares are now trading at only 9x consensus 2009 EPS estimates. This is well below the relative valuations of their peer group and considerably below top competitor Blue Nile’s 23x multiple. The discrepancy seems even bigger when you consider that in the 2nd quarter Blue Nile revenues grew only 2% while Bidz posted top-line growth of over 40%. So, we see large upside potential for Bidz shares (analyst consensus target price of $16) in the coming months.
Recommendation: Buy with a $10 price target.