January 24, 2013
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of online retail marketplace Overstock.com (NASDAQ: OSTK ) advanced as much as 15% after reporting its fourth-quarter and full-year earnings results.
So what: For the quarter, Overstock.com reported a 9% increase in revenue to $342 million as it reversed a year-ago loss to earn $0.37 per share. Relative to the lone analyst estimate, it fell slightly short of revenue figures at $343.3 million but crushed the $0.27 EPS forecast. Gross margin for the quarter was the biggest help, improving 170 basis points to 17.9% as a better product mix and lower warehousing costs ate less into its bottom line as in year's past.
Now what: With small-cap companies, you basically have to take earnings pops and drops like these with a grain of salt relative to the one or two analysts covering the stock. Yes, Overstock.com surpassed the lone estimate by $0.10, but Overstock has also been trying to execute one of the longest turnarounds in history. It's like watching a big rig try to turn around in a space the size of an alley. Overstock.com has done a better job of managing its inventory space to reduce warehousing costs, a definite positive, but the growth in revenue came at the cost of a decrease in overall customers. I'd still consider Overstock.com to be a very unreliable long-term investment and won't be touching it here.
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