Alibaba Group Holding Limited (BABA, Financial) increased its stake in zulily, Inc. (ZU, Financial), which operates as an online retailer in the United States, Canada, Australia, the United Kingdom, and internationally. Shares of the retailer rose even more than 20% in premarket trading after Alibaba disclosed that it owns 11.5 million Class A shares of Zulily, between May 6 through May 8, the prices were ranging from $10.74 to $12.25. With an average price of $11.50, the stake is for about $132 million and about 9.3% of its outstanding shares. Alibaba is now the largest foreign investor in the company.
Zulily reported weaker than expected financial results for its Q1 (and also cut its sales outlook), revenues grew just 29%, compared to the 87% obtained in the Q1 2014. Meanwhile, Alibaba posted better-than-expected results for its fourth quarter. The company had net income of $467 million, or $0.18 on a per share basis. Adjusted per-share earnings were $0.48, beating the consensus of $0.43. Revenue came to $2.81 billion, beating the FactSet consensus of $2.72 billion, which is an impressive 45% surge year over year. The amount of merchandise it sold increased by 40% in the quarter while active buyers increased by 37% when compared to the previous year, to 350 million.
Year-to-date, Zulily has been falling 43.2% to close on Friday at $13.30. On the other hand, Alibaba is currently trading almost 28% below its 52-week-high and 13% above its 52-week-low. The firm has a price to earnings ratio of 45.5 versus industry average of 32.20. Alibaba shares are down 16.2% in a year-to-date basis, while the S&P 500 has gained 1.1%.
Final Comment
In a previous article, we said that we were confident about Alibaba. Apart from its 300 million active buyers as of December 2014, we think that user growth will continue in the future. We also said that with relative good key advantages against its peers and a well-known brand, we believe the company will continue expanding its market share and this is a proof of that, because it demonstrates the firm interest in competing in the U.S. market.
Among other investors, Manning & Napier Advisors, Inc disclosed holding 1.64 million shares of the company, the value of the stake amounting to $136.51 million as of the end of the first quarter. Other funds like Matthews Pacific Tiger Fund (Trades, Portfolio) and Matthews China Fund (Trades, Portfolio) have taken long positions on the stock.
Disclosure: Omar Venerio holds no position in any stocks mentioned
