Overstock.com (NASDAQ:OSTK) recently reported much stronger-than-expected second-quarter results. The online retailer is benefiting tremendously from the huge surge of online shopping in general and online purchases of home furniture in particular. I believe that Overstock may have what it takes to become the first true, pure-play competitor of Amazon (NASDAQ:AMZN). This makes OSTK stock a great name for growth investors.
Overstock reported second-quarter revenue of $782.54 million, versus analysts’ average estimate of $680.2 million. Its sales more than doubled year-over-year. Overstock’s net income came in at $36 million, versus a loss of $25 million in Q2 of 2019.
Most impressively, CEO Jonathan Johnson reported that Overstock’s “number of new customers more than tripled year over year.” And the company’s monthly visits during the year that ended on June 30 reached 49 million.
Clearly, Overstock’s customer base is growing tremendously and the company is starting to become a truly big player in the e-commerce space. Overstock’s Q2 net revenue came in at $782 million, versus the much better-known Wayfair’s $2.3 billion.
OSTK Stock Has Important Advantages
Like Wayfair, Overstock specializes in home furnishings. But unlike Wayfair, it sells many types of items aside from furniture. Consumers can clothes on Overstock, along with accessories like sunglasses, handbags and perfume. The website also sells all sorts of tech offerings, including computers, cell phones and tablets, as well as nutrition products, sporting goods and pet products.
According to Overstock, in home furnishings, it occupies a unique niche. Specifically, it has more expertise in the sector than Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), but offers cheaper prices than Target (NYSE:TGT) and Wayfair. Over the years, I’ve bought a few pieces of furniture from Overstock, and I am able to find more furniture on its site than on that of Amazon and Walmart. And my impression is that Overstock’s products do tend to be cheaper than Target. I haven’t shopped on Wayfair.
Moreover, Overstock has been in business for more than 20 years. Its supply chain is likely quite strong and, in general, it probably knows what it’s doing. (I first ordered products from the website a decade ago).
As acceptance of ordering furniture online grows, the company’s core market is growing by leaps and bounds. The expansion of the online furniture market could slow after the novel coronavirus pandemic is over. But the sector is likely to continue to grow because consumers are more used to buying their furniture via the internet.
Finally, Johnson reported that it, along with two other websites, had been awarded “a proof-of-concept pilot with the U.S. federal government.” Under the deal, he said, “participating government agencies can make micro purchases, purchases less than $10,000 for items their employees need.” If Overstock becomes a key e-commerce contractor for the federal government, OSTK stock could get a key bump from the company’s federal revenue.
Best-Positioned to Become a True Amazon Competitor
Some pundits have labeled Shopify (NYSE:SHOP) an Amazon competitor. But Shopify primarily sets up websites for other businesses. Ebay (NASDAQ:EBAY) has many very small, inexperienced, amateurish merchants, and Wayfair doesn’t go beyond furniture. Target and Walmart have strong e-commerce operations, but they are still primarily known for their brick-and-mortar stores. So Overstock has an opportunity to become the first legitimate, pure-play competitor to Amazon in the U.S.
I think Overstock has all the ingredients necessary to accomplish that goal: rapid growth, a great deal of experience in e-commerce, and millions of products and many types of offerings.
The Bottom Line on OSTK Stock
Overstock is growing rapidly, has many positive catalysts, and is well-positioned to start taking significant market share from Amazon.
Meanwhile, the shares have a market capitalization of just $3.3 billion, giving the stock plenty of room to advance. I recommend that long-term growth investors buy the shares.
Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been Roku, solar stocks and Snap. You can reach him on StockTwits at @larryramer. As of this writing, Larry Ramer owned OSTK stock.