Great that we now have a separate board for naked shorting discussions. I won't go there, but hopefully this board can focus on issues more directly related to the performance of OSTK and it's business value/stock price. Become a Complete Fool
Here are some comments/questions about the upcoming 3rd quarter and OSTK in general.
1. OSTK's Q1 experiment with reducing marketing spend did not work IMO in the first quarter. A reduction of just over 2% from 10% to under 8% led to very slow YOY revenue growth of around 9%. The plan as I understand it is for OSTK to reduce market spending another 2% this quarter, down to around 6%. Predictions for YOY q2 rev growth: I'm thinking 0% or declining sales based on q1 results.
2. What will OSTK do in q3 when market spending is planned to go down to @4%? Will they abandon the plan if q2 shows declining sales? If they don't will they experience declining revenue growth in q3?
3. If you guess, as I do, that they will stick to the plan and that will result in 2 quarters of declining revenue, won't that lead to a stock price decrease? I believe it will as OSTK has been a growth story, i.e. forget about profits, we're investing in growing way above industry average to create a more dominant player. With 2-3 quarters of mediocre or negative revenue growth, doesn't that kill the fast growth story/reason that many investors bought? Doesn't that lead to a stock price decline as those investors leave?
4. If OSTK doesn't have profits or fast growth, what is it selling to investors? Does it have a new story? A position in the industry? A business valuation based on customers and size, even though the size is declining? Valuation based on price to sales instead of cash flow or PE?
5. Why is Amazon able to grow its business with such a low amount of marketing spending? Benefits of scale? Products like BMY that more naturally drive repeat customer transactions? Investments in technology that allow AMZN to personalize its web site for each customer? All or none of the above?
6. What makes a retailer dominant? Obviously size/scale is important, as they don't have anything proprietary they own, besides their internal systems. More specifically, what makes an Internet retailer dominant?
Feel free to discuss any one or more of these topics. Let's get some fundamental discussions started again for those interested like me in this area of OSTK's business.
Join the best community on the web! Becoming a full member of the Fool Community is easy, takes just a minute, and is very inexpensive.
Great that we now have a separate board for naked shorting discussions. I won't go there, but hopefully this board can focus on issues more directly related to the performance of OSTK and it's business value/stock price.
Become a Complete Fool