Zulily Inc (NASDAQ:ZU) surged by 20% in the opening hours yesterday but latter bout of profit booking ate up most of the gains and finally the stock closed with a gain of only 5.15%. The jump came on the back of the news of Alibaba Group Holding Ltd (NYSE:BABA) holding a stake of 9.3% in the company, valued at more than $150 million, as disclosed in an SEC filing reported last week.
Last week Zulily Inc (NASDAQ:ZU) announced a very disappointing first quarter result, leading to a small crash in the price of the stock and Alibaba used that opportunity to pick up 4.8 million Class A Zulily shares for $56 million. Zulily Inc (NASDAQ:ZU) conducts daily one day flash sales events on its online platform where it offers deep discounts with most of its 4500 strong product basket focused at mothers. Though Alibaba may not be interested in buying up the entire company but it may use the increased stake to tap the US market more aggressively. What the market is curious about is the reason behind increasing stake in such a company, which shows no sign of growth.
Zulily Inc (NASDAQ:ZU) reported a net sales of $306 million, barely making the low end of the revenue range previously provided by the management but the really disappointing part was the revenue growth rate plunging to 29% in 2015 from 87% in the first quarter last year. The guidance wasn’t much better as the company expressed an expectation of $285-$300 million in second quarter revenue, much lower than the consensus figure of $362 million. The full year net sales are expected to be in the band of $1.3-$1.4 billion, again much lower than the expected $1.5 billion mark.
Technically, the weakness and risk of more downside remains on the cards as long as the stock trades below the resistance band of $18-$20.