Tap into a Huge and Under-Penetrated Market with Ozon

Stocks to buy

Everybody’s looking for the next big thing in the financial markets, it seems. To find it, perhaps we should try looking outside of our comfort zone – and your local geography. If you’re prepared to do that, then I invite you to learn about Ozon (NASDAQ:OZON) and maybe even consider a position in OZON stock.

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You’re probably aware that e-commerce has become important on a global scale, particularly in the wake of the Covid-19 pandemic and the associated lockdowns.

And of course, there’s no shortage of well-known e-commerce companies to invest in. On the other hand, some of those company’s stocks might be expensive.

So today, I’d like to present to you a stock that hasn’t already had its “moon shot.” Just be prepared to keep an open mind, as we’ll be taking a trip far outside of North America.

A Closer Look at OZON Stock

The initial public offering (IPO) for OZON stock took place on Nov. 24, 2020. Interestingly, this was the first Russian IPO to list on a U.S.-based domestic exchange since May of 2019.

The previous guidance range for the stock had been between $22.50 and $27.50 per share. However, the American Depositary Shares (ADS) debuted at $30 apiece.

Impressively, the Ozon IPO resulted in the company achieving a valuation close to $6.2 billion.

Evidently, it didn’t take long for the bulls to be proven right as the shares jumped 20% in its first week. By the end of 2020, the stock price had reached $41 and change.

The momentum continued into the new year, with the bulls pushing OZON stock up to a 52-week high of $68.77 on Feb. 8, 2021.

It’s difficult to maintain that pace, so by March 29, the share price had fallen to the $52 area.

There’s nothing terrible about that, though, as the overall trajectory is still bullish and share-price pullbacks are to be expected along the way.

A Giant Marketplace

Maybe you’ve never imagined that you would ever invest in Russian e-commerce. Yet, this is a market that should not be underestimated.

After all, North Americans aren’t the only people who like to go online nowadays.

113 million people use the Internet in Russia, and as Ozon Chief Executive Alexander Shulgin is happy to point out, “The internet has become an integral part of the Russian consumer’s lifestyle.”

With roughly 9 million stock keeping units (SKU’s), as of Sept. 30, 2020, Ozon caters to many of those Russian Internet users with a wide array of products available to purchase online.

These products run the gamut, with categories “ranging from electronics, home and decor and children’s goods to fast moving consumer goods (“FMCG”), fresh food and car parts,” according to the company.

Clearly, the Russian e-commerce market is gigantic. Moreover, Ozon describes it as “large, fragmented, underpenetrated and growing.”

Translating into Revenues

If any company is prepared to dominate that market, it’s probably Ozon.

According to Ozon, as of June 2020, the company maintained a “top-of-mind brand awareness of 32%.” That easily beats the 18% maintained by Ozon’s nearest competitor.

That’s all fine and good. However, investors will undoubtedly want to know whether it’s translating into robust revenue generation.

I’m glad to report that the answer is definitely yes. Ozon recently released fiscal year 2020 earnings, with a whopping 104 billion RUB in revenues.

Don’t assume that everything is perfect, though, as Ozon recorded an operating loss of 17.3 billion RUB in 2020.

But then, at least that’s a slight improvement over the operating loss of $18.6 billion recorded during 2019.

The Bottom Line

Only time will tell whether Ozon, and Russian e-commerce in general, will continue to grow.

It’s a somewhat risky bet to make. Nevertheless, the rewards could be tremendous for the stakeholders if the market truly is as “under-penetrated” as it seems.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarketsFinom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.