This Retailer’s Business Model Isn’t Feeling the Sting of Supply Shortages

A number of companies have been warning this earnings season about potential supply chain shortages. While many retailers may see some partially bare shelves, those that have embraced a different business model are faring just fine.

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  • One such company is Overstock (OSTK). The company is an online-retailer. Its business model involves acquiring and selling inventory that other retailers have already tried to sell, although today it also carries new items.

    While many were expecting retail to struggle, the company’s most recent financials show only a 4 prevent drop in revenue compared to a year ago. Over a two-year period, however, revenues are up 102 percent, showing the strength of the company’s business model.

    Even with the modest dip this quarter, the stock jumped 20 percent on the news. That’s taken shares from flat to up about 24 percent in the past year.

    Action to take: The jump in overall earnings in the past year makes shares still look attractive, even at 29 times forward earnings. However, the stock doesn’t pay a dividend, so shareholders won’t have any income to smooth out the volatility in shares.

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  • Traders may want to jump in to benefit from the current uptrend. The March $105 calls, last going for about $9.50. The calls should provide a leveraged move higher for shares in the coming months.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.