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Summary

  • Overstock reported revenue of $332.5 million and EPS of $0.08, compared to estimates of $315.25 million in revenue and EPS of $0.10.
  • Although EPS was slightly short of estimates, its new initiatives are clearly growing the top line and point to a positive future.
  • My original article outlined why Overstock would grow revenue tremendously, and I advised purchasing ahead of earnings.

This morning, Overstock (NASDAQ:OSTK) reported exceptional results, and its novel strategies are clearly working. Revenue grew an exceptional 13% y/y, driven by a 9% increase in orders, coupled with a 6% increase in order size. Although gross profit margin declined from 19.7% to 18.8%, total gross profit improved 8% as revenue growth accelerated.

In my original article, I outlined the new initiatives that were recently launched that would provide catalysts for revenue expansion. Further, the business model adjustment will offer lower margins, but will allow revenue to grow prodigiously and mitigate operational risk.

The one negative on the earnings release was that Overstock missed EPS estimates by $0.02 per share. However, I opine that a myopic view should not be taken, as it is investing in its brand by spending on marketing. Sales and marketing expenses increased 23% y/y to $23.5 million. A more well-known brand will allow Overstock to expand its offerings, and when coupled with the Club O Rewards Program, will accelerate revenue growth by creating a virtuous buying cycle. I reiterate my buy on OSTK.

Disclosure: The author is long OSTK. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: Overstock Earnings - Delivers Double-Digit Revenue Growth

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