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 Overstock.com, (NASDAQ:OSTK) were dazzling the market today, climbing as much as 20% after the company delivered strong sales growth in its second-quarter earnings report.
So what: The online retailer saw revenue increase 13% in the quarter, to $332.5 million, beating estimates at $315.2 million as orders and average ticket both increased. Despite the better-than-expected sales growth, bottom-line results weakened as profits fell from $0.15 a share to $0.08, worse than the consensus at $0.10, as marketing expenses grew 23%. CEO Patrick Byrne noted that it was the company's 10th-straight-profitable quarter, and credited increased technology spending for the improved performance.
Now what: While the revenue growth was promising, Overstock seems like it will never be much more than a bit player in online retail, as it competes directly with Amazon.com, and seems unable to meaningfully differentiate itself. Also, the recent revenue growth has come at a price, as Overstock has missed earnings estimates in its last four quarters. If the retailer can find a way to consistently deliver revenue and profit growth, I may become a believer; but to do that, the company needs a better way to stand out in a sea of online retailers.
Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.