Amidst a record IPO market, investors continue to add shares of new companies that have the potential to become huge winners in the coming years. While trading stocks that have recently gone public can be a volatile endeavor, that hasn’t stopped the money pouring into new companies with unique business models and intriguing growth prospects. One recent IPO that stands out is Ozon Holdings (NASDAQ:OZON), a company that has been referred to as “The Amazon of Russia”.
The stock began trading on the Nasdaq Exchange on November 24th and is already up over 22%. While investors should be cautious about chasing the stock at this time, it’s still an interesting company to keep tabs on going forward. Here are a few important things to know about Ozon Holdings stock.
One of Russia’s Largest E-Commerce Companies
When you look back on the rise of major e-commerce companies such as Amazon and Alibaba, it’s easy to understand why investors love the potential of a company like Ozon. It’s a business that offers a wide variety of products on its online e-commerce platform. Ozon also allows third-party sellers to offer their goods on its platform. While the business model might sound familiar, it’s important to understand that Russian e-commerce sales are rising quickly. E-commerce sales grew by 41% year-over-year during the first nine months of 2020 in the country and revenue in Russia’s e-commerce market is projected to deliver an annual growth rate of 6.1% from 2020-2025.
The e-commerce market in Russia is highly fragmented, which means that a company like Ozon has room to compete with its major rivals including the number one e-commerce company in Russia, Wildberries. While Ozon is a smaller company, it is the most recognized brand among all online retailers in Russia which is a strong advantage. For the nine months ended September 30th, Ozon saw its revenue increase by 70% year-over-year to $876.5 million. The company also saw Gross Merchandise Volume increase by 188% year-over-year in Q2 2020. It’s fair to assume that Ozon is benefitting from many of the same trends that are driving profits for e-commerce retailers around the world at this time, which is why it’s an interesting stock to watch going forward.
One of the Largest Logistics Infrastructures in Russia
When it comes to e-commerce, a company’s logistics infrastructure is vitally important to its long-term success. Think about a business like Amazon, which has a huge network of fulfillment centers and can transport its products to customers in under 2 hours. With Ozon, investors will be impressed to learn that as of September 30th, 2020, the company had the infrastructure in place to deliver its products to 40% of the Russian population the day after an order is placed.
The company has recently doubled its logistics infrastructure, including a new 100,000 square meter fulfillment center in the Moscow Region. It currently operates with 9 fulfillment centers, 7,500 parcel lockers, 43 sorting hubs, 4,600 pickup points, and 2,700 couriers. As the company grows, its logistics network will continue to expand which means it could become a true e-commerce powerhouse.
Several Risk Factors
Any time you are evaluating stock that has recently started trading publicly, it’s easy to get caught up with all of the positives about the company. However, seasoned investors understand that accounting for major risk factors for a new IPO is crucial. With Ozon, there are several risk factors worth mentioning. The company operates in a highly competitive market and will likely experience significant fluctuations in its financial results over time. This is worth mentioning since most e-commerce companies are benefitting from the pandemic at this time, which could only be a temporary sales boost.
There’s also the fact that Ozon continues to report significant losses and has a long way to go towards achieving profitability. Finally, investors need to understand that any time they invest in a company located outside of the U.S., there are geopolitical, foreign exchange, and economic risks that are unique to that specific country.
Ozon Holdings is certainly an interesting company for investors to monitor going forward. It’s one of the most exciting IPOs to come out of Russia ever, and the stock is already off to a strong start. Ozon could be in for strong growth over the next decade since it operates in the eleventh largest economy in the world. If you are interested in adding shares of Ozon, it’s probably best to wait until the post-IPO hype dies down and until we have more earnings reports to evaluate the company on.
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist
10 Great Cheap Stocks to Buy Now for Under $10
As the P/E ratios of most S&P 500 companies look very expensive and the stock market continues to hit new all-time highs regularly, it's challenging for investors to find cheap stocks to buy now.
This goes for both share price since most stocks are trading higher on a per-share basis and valuation relative to earnings. Right now, the typical S&P 500 company is trading at about 25 times forward-looking earnings. Historically, S&P 500 companies have traded at about 15 times earnings in more normal markets.
While the S&P 500 as a whole is expensive, there are still a handful of undervalued stocks trading at less than $10.00 per share. Value investing opportunities for value exist if you know where to look. Putting together a list of cheap stocks to buy now requires looking into some smaller, riskier, unloved, or undiscovered parts of the market. These low-priced stocks might not look especially attractive today, but long-term investors stand to profit if they are willing to be patient and hold onto shares of these companies through multiple market cycles.
Some of these companies are great investing ideas because they're too small and too risky to attract most mutual funds and Wall Street money managers. Others have been beaten up by the market after a period of slowing earnings and profits but are now trying to turn around and bounce back.
You might find marijuana stocks, dividend-paying stocks, large-cap stocks, growth stocks, small-cap stocks, and even some bitcoin stocks in this list. While these low-priced stocks have many differences, these 10 stock picks all share a common characteristic, a super-low share price of $10.00 or less.
View the "10 Great Cheap Stocks to Buy Now for Under $10".