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Seeking Alpha: Ozon Holdings: A Growth Story


  • Ozon is heavily expanding and investing.
  • A look at Ozon's growth in Russia and potential growth abroad.
  • Ozon is undervalued at current metrics.
  • A very bullish price target for Ozon could be as high as 300.

Chances are you have not yet heard about Ozon Holdings (OZON), proclaimed by some as the Amazon (AMZN) of Russia. It is this author's opinion that that would be quite the stretch of a statement, but, nonetheless, Ozon could have a really bright future ahead of it.

If there is one industry that has prospered under COVID, it is the e-Commerce industry, and it is gaining traction in the world retail market that it will likely not retreat even when things return to normal.

We all have heard of Amazon, Alibaba (BABA), perhaps maybe even Jumia (JMIA) or Pinduoduo (PDD), but, today, we will be examining a market that has been overlooked by investors and that is Russia, and, more particularly, the company Ozon. The one thing that could really send this stock flying is its potential growth story, and it could be a glorious one.

Growth within Russia

Russia is still an untapped e-Commerce market, rather lagging behind in e-Commerce use by the population. In the US, we are looking at approximately 70% of the population using some sort of e-Commerce. In Russia, this number is probably hanging around 40% (figures range from source to source, so bear with me.)

The e-Commerce market for 2020 in Russia will likely be around $24 billion in sales, and some projections show that it could be as high as $50 billion as early as 2023.

Right now, the online retail scene in Russia is dominated by Wildberries, which is privately owned and controls about 15% of the market. The market scene is fragmented, and Ozon has roughly 7% of this market, but, as this market matures, you will see a winner controlling a majority of the online marketplace. For reference, Amazon controls half of the American online market scene.

Ozon is still a growing company and its growth metrics are impressive. GMV (Gross Merchandise Value) increased from 41,888m rubles in 2018 to 80,815m rubles in 2019, to 121,566m rubles for the nine months ended September 30, 2020. So that's roughly 565M USD, to 1.1B USD, to 1.64B USD. Growth rates of 93% and 50.4% (not an entire year, only 9 months included.) We will likely see figures like 2.2B USD in GMV, with revenues of 1.2B USD for 2020.

We will explore potential growth metrics a little bit later in the article. Let's quickly move onto potential global growth for Ozon.

Growth Globally

This section will primarily be speculative but by comparison with Ozon's top competitor in this case Wildberries. Wildberries is already operating in markets abroad such as Poland, Slovakia, Belarus, Kazakhstan, Kyrgyzstan, Armenia, and Ukraine. Including Russia, these countries amass a population of roughly 266.5M people, a huge potential market for Ozon. That doesn't even include other potential neighboring countries in which business may be viable.

It is my opinion that penetrating markets such as Poland and Slovakia (EU aligned countries) will be a difficult task for not only Wildberries but also if Ozon decides to explore foreign markets, even perhaps Ukraine where relations are rocky at best. But nonetheless, these are markets where there is a potential to chip away at market shares in retail.

A majority of these countries, excluding developed Poland and Slovakia, are trailing behind and still growing in online shopping popularity.

Potential global growth will not be included in any calculations or basic forecasting, it is mere speculation, but the opportunity is there.

Metrics and Forecasts

Perhaps the main argument that shares are undervalued, and they could explode in price, is the comparable metrics with other rivals. We are now living in a time where low interest rates have reshuffled pricing models and, frankly, euphoria has hijacked traditional investing. Profit margins, debt levels, and responsible governance are not relevant right now. Eventually, stock prices revert to means, and rationality returns, but we are currently living in a world where Tesla (TSLA) has a market of nearly 600B.

This crazy ride will likely not end anytime soon as governments around the world are focused on keeping the party going and making sure there are no losers. Expect further stimulus, expect forced inflation, and expect lower interest rates, or even negative interest rates.

A popular metric used to value online retail is revenue and GMV. When Ozon first hit the US market, there were articles expressing concern over profit margins, this is not relevant in the current investing environment we are in. Analysts and investors are focused on sales growth rates, and maybe if we can expect profits in the next decade or so, that would be a supplemental benefit. Cynicism aside, Ozon is relatively undervalued on a P/S metric when compared to other e-Commerce companies.

Ozon is currently trading at 7.5x revenues. If we compare Ozon to other new e-Commerce companies, we can see there is room for the current share price to grow. Jumia, the African e-Commerce company is currently trading at 15x sales, and Pinduoduo (Chinese e-Commerce company) is trading at a huge 26.6x sales metric.

As mentioned just a paragraph ago, we are truly living in interesting times. There are some analysts who are using forecasted figures from the end of this decade to justify price target increases for Tesla. We do not have to resort to fictional writing exercises to justify a higher price target for Ozon.

Excluding any sort of potential growth in markets abroad for Ozon (which is a possibility.) If the Russian online retail market is expected to double in roughly 3 years to 50B in sales, let us assume that with aggressive spending and investing in infrastructure Ozon manages to fight for a 15% market share in this market space. That could give Ozon $12.5B in GMV, which could translate to something like $6.9B in revenue if the current metrics hold up. Now, let's value Ozon at a slightly higher price to sales ratio, Alibaba was trading at 10x sales just about a month ago, so let's go with that. The companies are not really comparable, but the metric isn't as aggressive as Jumia's P/S or Pinduoduo's P/S. Ozon's shares trading at 10x sales in this scenario could place its shares at 373 a share, which is 680% higher than today's share price.


Ozon's shares have great potential, but with that being said, there are some risks. Perhaps the biggest risk is geopolitical tensions. We are talking about Russian shares listed on NASDAQ.

Just last week, there was a bipartisan bill passed by US lawmakers that will give Chinese stocks listed on US exchanges 3 years to comply with US auditing and accounting standards. If these companies fail to adhere to these standards, they will be removed from the exchanges they are listed on.

Russia is not far behind China in being a thorn in the West's side. However, China will likely take the limelight in the 2020s and most attention will be diverted to challenging China's rise. For that reason, there will likely be no geopolitical risks spilling over and jeopardizing Ozon's listing in the US.


Ozon's potential truly lies in its growth story. Should Ozon compete and succeed in its fight to be Russia's Amazon, the sky is the limit. If Ozon succeeds in the Russian market, there is nothing stopping it from expanding to foreign markets just like Wildberries has, in fact, this should be expected.

Another leg up that Ozon has is brand recognition. While Ozon may be smaller than Wildberries, sources say that more Russians are familiar with Ozon than with Wildberries. This statement could be supported by the fact that Amazon and SoftBank (OTCPK:SFTBY) have approached the owners of Ozon about a potential acquisition. International interest in Ozon is high, and apparently, it is the only company in Russia that Amazon had any interest in acquiring.

Ozon's potential is huge, and it is being noticed. Keep a keen eye on this stock as a growth stock champion.

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