On November 12, Bidz.com (Nasdaq: BIDZ), a Culver City, California based company, beat third-quarter sales and revenue figures and raised guidance for the fourth quarter. To some, this may have come as a surprise, but the company CEO David Zinberg states that "I believe we haven't even scratched the surface."
Last year's revenue of $132 million was up 46% from the year before. Bidz.com thinks it can deliver 25% to 30% annual revenue growth over the next 3 to 5 years. That's without international expansion.
The company finds many of its customers through Internet banner ads and search engine sponsorships.The global nature of the Internet means many Bidz.com bidders are overseas. Customers outside the U.S. accounted for 24% of third-quarter sales, up slightly from a year ago. Early next year, the company will roll out a version of its site in Spanish. It expects other languages to follow Also in the first quarter, it plans to launch a standard, non-auction retail site, Buyz.com. Globally, the jewelry market is a $160-billion-a-year business. In the U.S., the Commerce Department said jewelry stores had $30.1 billion in sales last year, up almost 7% from the year before. Those figures don't include online jewelry sales.
Elizabeth Pierce, an analyst with Roth Capital Partners, thinks the system is both an efficient way for retailers and distributors to liquidate inventory and an entertaining way for consumers to shop.
"In our opinion, it is the combination of the company's sophisticated software that runs its interactive bidding, its product mix and its marketing strategies that have created this scalable business model," Pierce wrote in a client note. Analysts say Bidz.com gives customers reasons to come back.
Early on, the company had to buy its inventory on credit, restricting what it could offer. But as sales have grown, it has had the cash to buy jewelry with more resale potential. The company now also buys individual diamonds and has them made into always-popular items, such as tennis bracelets and studs.
ThinkEquity Partners analyst Ed Weller describes growing revenue and improved inventory as a "nearly perfect storm". "The constant availability of such always-in-demand styles improves conversion and satisfaction," Weller wrote in a client note. ThinkEquity was the lead underwriter of Bidz.com's June initial public offering. Looking at recent institutional activity (as of 9/30/2007), over 1.8 million shares have been accumulated by mutual and hedge funds just in the past quarter. And only 943 (yes, not a misprint) were sold!
As of October 31, 2007, BIDZ has a trading float of about 13.9 million shares, with nearly 1 million of them sold short. Such a high short position may add fuel to the fire on the upside.
The chart for BIDZ shows a nice and steady climb for the last 3 months. One can clearly see that bases were established at $8, $12-$14 and now around the $16-$18 area. A close above $18 should get the stock into the low $20's.
On November 17, 2007, BIDZ was added to the much-followed Investor's Business Daily Top 100 companies list at #2. Having such a high debut will attract further new investors, both retail and institutional.
One last impressive fact about BIDZ is that when DOW JONES touched its high on October 11, 2007 (14,200), BIDZ stock price was $12.25 per share. DOW JONES closed at 13,176 on November 16, 2007 – while BIDZ closed at $16.85. This clearly shows the strength and the accumulation of BIDZ.
Disclosure: Author has a long position in BIDZ