Brokerage firm Stifel just initiated coverage on this Top Pick retailer, with a “buy” rating and a $30 target.
Zulily, Inc. (ZU)
from Shortex Market Letter
Zulily, Inc. (ZU) the discount online retailer, specializing in general merchandise for children and mothers, is a long position ready to grow. Zulily provides products including apparel, toys, electronics, and kitchen goods. Its overall outlook shows its revenue increasing and its active customer base growing from 352,000 to 4.5 million (a 72% jump from a year ago.)
The initial sell-off earlier in the year, based on earnings expectations that were not met and a lower than expected growth rate, as well as the company’s ability to leverage its “flash sale” method (with total orders increasing 63% to 5.9 M), sets the stage for Zulily to move upward.
Zulily’s capital expenditure of $55 to $65 million in the year to come is equally impressive.
Currently, Zulily is sitting on a cash equivalent and short term investment of $344 M. Its Q3 revenue of $286 M is in line with the consensus, and its EBITDA of $6.4 M vs. the street’s $2.1 M was a result of its improved gross margin. The company’s 2014 sales outlook is solid with $391-$416 M leading into the Christmas and Holiday season for Q1 2015, with Fiscal Year net sales of $1.20 to $1.225 Billion and a net income of $15 to $25 Million.
The chart shows /ZU/ technical picture has been deteriorated by the plunge through secondary support @ (31-33). Accumulation/distribution (A/D rating) on the negative mode. Needs consolidation/base-building in coming sessions. Filling the downed-gap of (35-32) a must. Expected ascend to clearing-up primary resistance @ (32-34) and secondary resistance @ (37-38).
LONG POSITION RECOMMENDATION
BUYING RANGE: Up to 26
NEAR TERM OBJECTIVE: 39
INTER MED OBJECTIVE: 49
STOP LOSS: 22
Joseph Parnes, Shortex Market Letter, www.shortex.com, 800-877-6555, December 19, 2014