BIDZ

[stocky]

BIDZ.COM just visit and I bet you will be bidding. Due to small size of company 0.45B and tripple digit growth, you would like to take a look at this puppy.

[stocky]

BIDZ trading @ 18 in Pre Mkt, its a breakout level as well. Mind you due to its low float and amazing insider holding level, you may find lot of volatility. Just dont bet your horse on this one.

[Houlahan]

Applaud Stocky! good call. Thanks for the head up. I did not jump, wish I had.

[David Randolph]

BIDZ.COM just visit and I bet you will be bidding. Due to small size of company 0.45B and tripple digit growth, you would like to take a look at this puppy.

Yep, BIDZ's chart looks awesome stocky, trading at a new all time high today

«BIDZ.com, Inc. (BIDZ) operates as an online retailer of jewelry primarily in the United States and internationally. The company operates a Web Site, bidz.com, for the purpose of selling merchandise, utilizing an online sales auction platform. Its product inventory includes gold, platinum, and silver jewelry set with diamonds, rubies, emeralds, sapphires, and other precious and semi-precious stones; and watches. Its products also include rings, necklaces, earrings, and bracelets. In addition, BIDZ.com, Inc. offers a Certified Merchant Program that enables merchants to sell various goods, such as art and collectibles. The company was founded in 1998 and is headquartered in Culver City, California.»

I like the business.

«The Company is introducing new guidance for 2008 and expects revenues to be in the range of $225-$230 million, pre-tax income of approximately $23.5-$25.5 million and gross margin of approximately 27-28%. The Company expects its effective tax rate for the full year of 2008 to be approximately 40%, and expects to end the year with approximately 30.0 million fully diluted shares outstanding. The Company expects fully taxed 2008 GAAP EPS of $0.47-$0.51.»

Forward P/E is 41, it looks pricey.

Anyway, I'll keep it under the radar and will study it some more, thanks stocky

[David Randolph]

Red flag on BIDZ:

Citron Adds Some Color and Clarity to Bidz.com. (NASDAQ:BIDZ)

Citron has credibility and does in depth research, be careful with this high flyer. 

[la-onda]

fyi:
Diamonds Maybe Aren't Forever

Tuesday's session saw investors cheer for the first time in a while as the market rallied on the heels of a major cash influx for Citigroup from an Abu Dhabi investment firm. The move gave many a warm and fuzzy feeling for investors in the financial group and extended to the overall market. Bears still warned that the largest dollar gainer on the Dow was Altria Group which has long been grouped into the defensive play category. Never the less, Bulls were abound as all
three indices gained on the day.

In the small cap space, one name was under increased scrutiny following a report by the internet blog Citron Research. The site, formerly known as StockLemon.com, has been known as having short positions in stocks it highlights and has amassed a fairly accurate
and profitable track record.
In its latest post on November 26th, the operator names Bidz.com (BIDZ) as a suspicious company that warrants increased due diligence before investing. The Company is an online auctioneer of jewelry. Bidz offers its products through a live auction format requiring only a $1
minimum opening bid. The auctions are unlike any others on the Web with starting bids at $1 and have an extended auction time that resets if bids are placed during the last 15 seconds.

On Tuesday, the Company reaffirmed its outlook following sales over the Thanksgiving holiday weekend which was noted as being 78% higher compared to last year's holiday weekend. Guidance for the fourth quarter was projected to be in the $56-$58 million range and
expectations were for pre-tax income of $5.6-$6 million. For the year, expectations were for $180-$182 million with gross margins of 27-28% and pre-tax income of $18-$18.5 million.

Analysts were expecting revenue for the fourth quarter of $57 million, 2007 revenue of $181
million 2008 full year revenue guidance was to be in the range of $225-$230 million, pre-tax income of approximately $23.5-$25.5 million and gross margin of approximately 27-28%. Earnings per share for the year were expected to be in the 47 cents to 51 cents a share range.
Analysts expect a fiscal 2008 profit of 50 cents a share and revenue of $230 million.

In Citron's report, the appreciation in the stock was due to the sympathy type buying action which caused a name like Medifast to grow in market capitalization because of the growth in Nutrisystems.
Citron contended that Blue Nile is the names causing the sympathy
players to pile into BIDZ. Citron also noted that the Company's inventory numbers are somewhat alarming when comparing to other online liquidators. Cash balances were also something investors should focus on when comparing this name to others such as Overstock.com and Blue Nile. Finally, Citron points to some related party transactions, which in fundamental analysis causes many red flags to appear because of their disingenuous
nature. The related party transactions are with a fairly large shareholder who also happens to be BIDZ's largest creditor and also a convicted felon according to Citron.

Following the report, shares plunged from over $22 on Monday to close at $11.89 on Tuesday, almost cutting the market cap in half. In response, the Company called a conference call after the close to discuss with investors what it labeled as "innuendo and inaccurate information" about the Company.  In the conference call, the Company said that they felt obligated to
respond to the report and noted that inventory and cash levels don't necessarily compare to Blue Nile and Overstock since they have different business models. With inventory, the Company noted that the increase had to happen to increase revenues. On cash, the Company
noted a large line of credit to fall back on if cash was needed.
On the CEO's salary payment, Citron alluded to paying the Company 30,000 shares a month to its top executive. But the Company noted that the selling of the stock was due to a 10b5 trading plan. The Company noted that since that time, it reduced the plan from 30,000 a month to only 10,000 a month.
On Citron's alluding to the Better Business Bureau's rating of F due to poor customer service, the Company noted that it was true and that the growth in the business from the early years outgrew their ability to offer quality service. But they noted that since that time,
only 7 total complaints were still unresolved. In the question and answer session, management took a barrage of questions from analysts who questioned everything from the presence of
televisions on the site to the `shill bidding' accusations. Overall, management attempted to defend each and every aspect which is commendable, but in reality might have only opened the door even further to scrutiny and speculation as the stock dropped another $2.50
in after hours trade. With Citron Research expecting to release additional information in a follow-up report, the name is certainly loaded with shorts and will certainly be a closely followed name over the coming days.

Investors would be wise to watch. 

(from Knobias newsletter)

[Houlahan]

In defense of BIDZ.....
Mr Left SHORTS BIDZ!!   He is making money!!
http://biz.yahoo.com/ap/071127/bidz_call_citron.html?.v=1

The Citron report was published online Monday by Citron editor Andrew Left. After it came out, Bidz shares began to decline. The stock fell 17 percent, or $3.38, to finish at $16.56 that day; on Tuesday, the shares sank $4.67, or 28.2 percent, to $11.89 on volume of more than 13 million shares. The average daily volume is under 500,00 shares. The stock has traded between $6.82 and $22.50 since its shares listed on the Nasdaq in June.

"Stocks react to truthful information. Stocks don't react to innuendo. So therefore, saying that my report made the stock go down -- no, the information in the report gave concern to investors," Left said in a phone interview prior to the conference call Tuesday.

Left said that he shorts Bidz' shares, which implies he stands to profit from a drop in the stock price.

Left added that he had not been contacted by Bidz.

[Houlahan]

Bidz.com To Investigate Recent Trading Activity

Last update: 11/28/2007 5:37:40 PM

DOW JONES NEWSWIRES

Bidz.com Inc. (BIDZ) said it has reported to the Securities and Exchange Commission and Nasdaq possible wrongdoing by a Citron Research editor.
The company directed its legal counsel to investigate.

The Culver City, Calif., online jewelry auctioneer alleges derogatory remarks about Bidz.com by the analyst may have resulted in potentially abusive, "naked" short selling of its shares.
The company's stock closed at $10.10 before trading at $10.85 in after-hours activity.

-Jennifer Hodson; 201-938-5400; [email protected]
(END) Dow Jones Newswires

[stocky]

Citron Research need to be respected. As David said red flag.

[Houlahan]

OK. I hear what your saying. I was going to check out citron but there website is down tonight. In no way did I mean to slight David. Forgive me. I highly respect yours and David's opinion! Maybe BIDZ should be removed from the Watch List. I feel like we should remove stocks from the Watch List to a newly created thread "Bumped from Watch List", when they are not "worthy" to be Watched. BIDZ is shady, needs to be removed.

[stocky]

Bidz website is very addictive. But even with the best business model, technology and whatever, if the management has some hidden skeletons then things are bit shakey. I just commented about the Citron, b/c if you have followed them as stocklemons these guys can cut a stock like knife cuts butter.

[David Randolph]

Maybe BIDZ should be removed from the Watch List. I feel like we should remove stocks from the Watch List to a newly created thread "Bumped from Watch List", when they are not "worthy" to be Watched. BIDZ is shady, needs to be removed.

Hi Houlahan, how are you?

I think there's something to learn from "shady" stocks too. And what is not worthy today can be worthy tomorrow, as things change.

Bidz website is very addictive. But even with the best business model, technology and whatever, if the management has some hidden skeletons then things are bit shakey. I just commented about the Citron, b/c if you have followed them as stocklemons these guys can cut a stock like knife cuts butter.

Indeed, when StockLemon attacks a stock, it usually destroys management's credibility. BIDZ fell 68% in just about six weeks after the SL report.

The company announced it has been buying back shares in the open market:

• Bidz.com, Inc. Announces Repurchase of Shares
Business Wire (Wed, Jan 2)

I see over the historical financial numbers that BIDZ has strong positive seasonality in the 4th quarter.

A change in the tax rate will have a big effect in 2008 EPS and net profit margins:



Look how a 26.8% revenue growth translates into a lower EPS expected for 2008. This is because the tax rate will probably rise from about 10% in 2007 to 40% in 2008.

Anyway, given the strong positive seasonality in the 4th quarter, I believe BIDZ will beat the $0.16 EPS expected by analysts for this quarter.

I think if one could get BIDZ in the $5-$6 range between now and February 15th he would get away with at least a 50% profit after the positive earnings surprise probably to be released by mid February.

As you know I'm not into the "go for a bounce" plays, but I think BIDZ's has some value and it is starting to get too cheap and too oversold here.

I'll keep it under the radar ...

[David Randolph]

They have a million dollars cash as of Dec. 07. Would this increase the number of days to cover a short, after they complete the buyback?

? No, the cash that the company has on its balance sheet has nothing to do with the number of shares short or the number of days that it would take to cover those shorts.

Tax rate increasing from 10 to 40%! wow, no wonder everyone runs to another country to run a business...the tax rate runs them off after the honeymoon is over. I will keep watching this after-Valentines Day gift.

Indeed, 40% is too high. Travelzoo for example, because it is based in the NY state, pays 45% of net income in taxes. The company should move to Bermuda or Cayman Island and increase profits ... shares would rise 50% as a result

David, did I understand this correctly. BIDZ usually has a strong 4th quarter-Dec 07. But tax rate increase dropped their EPS to 0.16.

No, I was talking about next year, that is, 2008.

Anyway, BIDZ raised guidance in January 14th:

• Bidz.com, Inc. Now Expects Better Than Anticipated Fourth Quarter and Year-End 2007 Results
Business Wire (Mon, Jan 14)

I think if one could get BIDZ in the $5-$6 range between now and February 15th he would get away with at least a 50% profit after the positive earnings surprise probably to be released by mid February.

The stock jumped 50% plus allright. But I missed it (I wasn't looking for it anyway), because the company pre-announced earnings.

BIDZ touched its descending 50 days SMA and came back down to the previous level. This is because there wasn't any surprise here and the company maintained its 2008 guidance:

«The Company also reaffirmed its guidance for 2008. The Company expects revenues to be in the range of $225-$230 million, pre-tax income of approximately $23.5-$25.5 million and gross margin of approximately 27-28%. The Company expects its effective tax rate to be approximately 40%. The Company expects fully taxed GAAP EPS of $0.47-$0.51, and expects to end the year with approximately 30.0 million fully diluted shares outstanding.»

There's the damn 40% as I figured. Now if we consider the midpoint of the guidance range it gives us $0.49, so the forward earnings multiple is $8.48/$0.49 = 17.3, which isn't particularly expensive, but ...

1) Considering Citron Research warning;
2) The EPS decline in 2008 when compared to 2007 (mainly due to the rise in the tax rate, but nonetheless)
3) The fact that there are much more attractive stocks outthere, given the general market's recent turmoil;

... I say BIDZ still has a higher chance of going lower over the medium term.

Nice talking to you Houlahan, good luck

[Houlahan]

They have a million dollars cash as of Dec. 07. Would this increase the number of days to cover a short, after they complete the buyback?

? No, the cash that the company has on its balance sheet has nothing to do with the number of shares short or the number of days that it would take to cover those shorts.

Sorry, i was not clear. The million dollars on the balance sheet showed they had the $$ to buy the 100,000 shares. After they buy-back shares will this increase the number of days to cover a short?

[David Randolph]

Sorry, i was not clear. The million dollars on the balance sheet showed they had the $$ to buy the 100,000 shares. After they buy-back shares will this increase the number of days to cover a short?

Well, now they have $4 M, which still isn't much for a $220 M market cap company. The company buying back shares doesn't increase the number of days to cover the shorts.
The number of days to cover shorts is the # of shares sold short divided by the average volume traded. For example, if there are 10 million shares sold short and the average daily volume (say, of the past 60 trading days) is 1 million, the number of days to cover the shorts is 10.

Coming back to BIDZ ... we already have Citron's version of the facts, but on the other hand there are several analysts recommending buying BIDZ, also with compelling arguments. Probably this is why the stock didn't just kept going down to almost zero and then fall to the OTCBB or PK, which often happens when Citron really attacks a company.

Let me just copy/past another analyst's view on BIDZ:



Key Points

• 4Q07 results Beat expectations by a wide margin: Revenue and pre-tax income of $63.2MM and $8.2MM topped Street estimates of $58.7MM and $6.1MM, respectively.

• 2008 guidance was In-Line with consensus: Street estimates for 2008 revenue and pre-tax income were $231.8MM and $24.9MM; management reaffirmed its existing revenue midpoint of $227.5MM but raised its pre-tax income midpoint to $25.5MM. At the margin, we'll call it In-Line guidance.

• Operating margins hit an all-time high: BIDZ's operating margin rose a whopping 1,040 bps Y/Y to 13.2% in 4Q07 -- this is an all time high. Incremental margins came in at 28.6%, down a few ticks from the 32.2% last quarter but still very high.

• Key operating metrics improved significantly: BIDZ added 110k new buyers during 4Q07 -- far and away the most ever and an 89% increase over the number of adds in 4Q06. The average number of items sold per day rose to 12,709, up 31% Y/Y, a material acceleration from the 21% growth seen in 3Q07.

• Fundamentals are eclipsing innuendo: BIDZ shares have been fighting a riptide of malicious innuendo since early November, and the 4Q07 results go a long way toward repudiating the Bear "thesis". Between management's new $20MM buyback authorization and a materially improved institutional investor base, a short squeeze seems quite possible in the near term.
We are buyers of the stock at the open: Given the generally weak 2008 outlook given by many retailers of discretionary consumer goods, we believe that investors are hungry for the shares of companies that are taking share -- and doing it profitably. Reiterate BUY and $19 price target.



THE BULLS WILL POINT TO...

• 4Q07 results Beat expectations by a wide margin. Revenue and pre-tax income of $63.2MM and $8.2MM topped Street estimates of $58.7MM and $6.1MM, respectively.

• 2008 guidance was In-Line with consensus. Street estimates for 2008 revenue and pre-tax income were $231.8MM and $24.9MM; management reaffirmed its existing revenue midpoint of $227.5MM but raised its pre-tax income midpoint to $25.5MM. At the margin, we'll call it In-Line guidance. And in this economic environment, In-Line guidance is a clear positive.

• Operating margins hit an all-time high. BIDZ's operating margin rose a whopping 1,040 bps Y/Y to 13.2% in 4Q07 -- this is an all time high. Incremental margins came in at 28.6%, down a few ticks from the 32.2% last quarter but still very high.

• Key operating metrics improved significantly. BIDZ added 110k new buyers during 4Q07 -- far and away the most ever and an 89% increase over the number of adds in 4Q06. The average number of items sold per day rose to 12,709, up 31% Y/Y, a material acceleration from the 21% growth seen in 3Q07.

• BIDZ announced an increase in its share repurchase program. Last week, BIDZ announced that (1) Bank of America had increased BIDZ's credit facility to $25MM from $15MM and (2) it had increased its share buyback authorization to $20MM from $5MM. This increase allows management to repurchase approximately 10% of outstanding shares (based on Monday's
closing price). The company can begin repurchasing shares on Tuesday, and we expect management to be fairly aggressive at current levels.

• Institutional ownership is on the rise. One of the key reasons why the shorts were able to so easily manipulate BIDZ back in November was the relatively low level of institutional ownership. At the end of September 2007, 33% of the float was owned by institutions -- as of December 31, 2007, that level had risen to 42%, and we believe it has risen even further since then. Institutional investors are far less likely to be spooked by the kind of "hit and run" tactics
employed by the BIDZ shorts.

THE BEARS WILL POINT TO...

• Acquisition costs for new buyers ticked up. BIDZ' cost of acquiring a new buyer rose to $51 in 4Q07, up 13% Y/Y (a deceleration from 19% last quarter). We are only mildly concerned by this increase given the fact that BIDZ also posted an all-time high in its operating margin.

• BIDZ enjoys several counter-cyclical hedges but is not "recession proof". We thought that management did a nice job on the call of making it clear that while yes, their business certainly has several powerful counter-cyclical hedges (e.g. a rise in bargain hunting on the part of consumers, or BIDZ ability to get even better deals from suppliers looking to unload excess inventory), it is not recession-proof. BIDZ still very much falls into the "consumer discretionary"
bucket, and if the consumer's balance sheet deteriorates materially between now and year end BIDZ will be impacted. In light of this, we are pleased to see that management has decided to remain very conservative with its guidance.

VALUATION

Our $19 price target is based on a combination of P/E and EV/EBITDA frameworks. P/E: We apply a 29x multiple (1.3x our long-term growth assumption of 23%) to our 2009 EPS estimate of $0.65 to arrive at a target valuation of $19.
EV/EBITDA: We apply a 14x multiple (0.7x our long-term growth assumption of 21%) to our 2009 EBITDA per share estimate of $1.13 to arrive at a target valuation of $19 (adjusting for $3.00 in cash and cash equivalents per share).
Risks to the achievement of our price target include: (1) a decline in consumer demand for goods in the luxury "long tail"; (2) a decline in the supply of closeout jewelry, which could result in BIDZ being unable to acquire adequate amounts of inventory; (3) a small float makes BIDZ shares more susceptible to manipulation than other stocks in our coverage universe.

Now me:

It appears to me that Citron's analysis is much more profound than these bull analysis. I don't appreciate the tone of the bulls, as they don't respond to Citron's red flags, they just point to the published and public information. But everybody knows the public information, what is interesting to know is what's under the carpet.

Another issue: the company said they would buy back $20 M of their shares buy they have just $4 M in cash.

I'll keep an eye on BIDZ, as I like the sector and business model, but not the company in itself. Isn't there another one, bigger, in the same sector? Yes, it's NILE. We should have it on the Watch List too (even though, at least on the surface, BIDZ looks much more attractive).