Novice Investing - An Even More Agressive Overstock

Date: Tuesday 13th 2008f May 2008 07:35:52 AM

An Even More Agressive Overstock - 12/14/2007

By: Novice Investing Staff

Late last year, we mentioned about Overstock.com Inc. (OSTK) being the next Amazon. We drew the similarities of Overstock with Amazon with the fact that it is very aggressive in courting online customers to shop at Overstock site. Just like last year, Overstock is even growing more aggressive this holiday season. A first look at Overstock's site shows a "Free Shipping Site-Wide" option. Remember that last year, they are offering a flat $ 1 Rate Shipping. Taking a look on what free shipping Overstock is offering brings us to 15 different shopping categories from Furniture to Office Supplies.



As we mentioned late last year, clearly Overstock was looking up at Amazon as its primary competitor. The past year had been brutal for Overstock, however. Despite aggressive promotion in the past year, Overstock's revenue actually fell for the last fiscal year. Meanwhile, selling general and administrative expense soars more than 60%. As a result, Overstock reported $ 101 Million losses for the fiscal year ending in December 31st 2006. Meanwhile, Overstock cash on hand held steady as it conducted stock sale to build up cash cushion. Overstock currently has $ 46 Million of positive net cash.

This year, just as it was last year, Overstock was comparing itself with Amazon. When you browse one item (say a Peter Lynch book), Overstock will display their price and Amazon's for comparison purpose. Overstock also has the same breadth of products offering as Amazon. Clearly, it is looking up at Amazon as competitors. The similarities stop there. Amazon shares had been on a tear this past year, rising from $ 36 to $ 100 per share at the top. With dwindling warchest (unless it kept selling its shares to the public), Overstock had little time to turn itself around. Its predecssor Amazon, had $ 1 Billion of warchest during its darkest day. Overstock doesn't have that kind of luxury. However, it is interesting to watch how the company fares in the next year.

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Disclaimer: The sole purpose of this article is educational. This article is merely the opinion of the writer and is not in any way a buy/sell recommendation regarding Overstock.com Inc. (OSTK) or any other securities.

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