Earnings Preview: Overstock.com

Overstock.com (OSTK) is expected to report Q2 earnings Friday, July 18, before market open with a conference call scheduled for 11:00 am ET.

Guidance

The consensus estimate is for a loss (28c) for EPS and $180.66M for revenue, according to First Call. Oppenheimer expects Overstock to report in-line Q2 results with roughly $2.5M in EBITDA, as solid revenue growth is partly offset by higher marketing spending. The firm continues to expect modest improvements in revenue growth and margins in FY08, although management's willingness to spend on brand advertising remains a wild card.

Analyst Views

Opco expects Q2 revenues to be in line or slightly ahead of estimates. The firm estimates revenues to grow 22% to $182M due to an easy comp YAG (-6%), improvements in site technology increasing conversion rates and broader product selection. Additionally, Overstock is likely partly benefiting from consumers "trading down" and looking for best prices.

Canaccord Adams said that given Overstock's ongoing lack of providing guidance and after two consecutive years of negative growth in 2006 and 2007, expectations cratered and growth could stay at optically higher levels for a few quarters. Two years of declining business, and the potential for management to hatchet costs could drive near term upside results, but Canaccord believes the near term focus catches up with the company heading to the end of 2008 and into 2009.

Key issues for the conference call include: Any commentary giving a glimpse into forward guidance; CapEx expectations for 2008; commentary on competition from eBay (EBAY) and Amazon.com (AMZN).