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"Risk comes from not knowing what you're doing" Warren Buffett I look and sift the world for such misplaced bets. When I occasionally find one, I first exploit it for profit. Then, I write about it for anyone else interested in such ideas. Twitter: @unemon1 Scribd:... More
  • Zulily Inc. (ZU): A 50% ++ Downside Potential From Here 3 comments
    Feb 28, 2014 10:26 AM | about stocks: ZU

    Is the Market Aware of the Limited Maret Potential ... for ... ZU's Business Model?


    IRRATIONAL Exuberance + Very Tiny Free Float + Short Squeeze

    =Current Valuation given to ZU … is simply … RIDICULOUS!

    Disclosure: I am short ZU.

    Stocks: ZU
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  • James Sands
    , contributor
    Comments (2721) | Send Message
    Must have not listened to the earnings call....Zulily is going to branch out into other categories that appeal to all. The mom-focus has allowed scale and network effect. The company is going to continue to move to home, kitchen, and other categories.


    The market has bid the stock price up based on speculation as to this larger market potential. So the market is not giving Zulily a $6 billion market cap for only mom growth. This contradicts the claim espoused in the link.


    Plus for whatever reasons, analysts reduced Zulily's expected growth from 115% to 75% in the fourth quarter (best performing seasonal quarter), which clearly allowed the company to beat handily. This could have been manipulative, but anyone could have seen Zulily's beat coming on the rev side.


    The clearest thing to think about with Zulily is that they are growing better than any other flash-sale model substantially. They have overtaken everyone except Rue La La and Fab from a user demand metric, if they overtake these two, then they will be the largest potentially in North America. Groupon's model is not the same, this is why they bought Ideeli.


    Anyways, the company is on pace for $2 billion in revenue in 2016 from $18 million in 2010. The company has over $300 million cash and will continue to add anywhere from $50-75 million a year, placing cash near $500 million by 2016. Just considering this simple revenue potential, the company will easily be over $20 billion market cap minimum in 2016.


    There are of course, no guarantees that the company will meet this target.
    28 Feb 2014, 10:44 AM Reply Like
    , contributor
    Comments (421) | Send Message
    Author’s reply » Yeah, I did listen to the call. To be honest with you, I am not so sure if the company will be able to branch out into other categories. I do not see ZU competing with AMZN. Right now, ZU does have a nice business model ... and it has proved to be very successful ... in its niche market.


    Of course ... ... if you expect ZU will generate 50b in revenue 10 years from now ... ... then the current valuation is Cheap.


    It's all about expactation ... I do think Markets' expectations re ZU are wrong. Time will tell
    28 Feb 2014, 02:13 PM Reply Like
  • James Sands
    , contributor
    Comments (2721) | Send Message
    Thanks for the reply...I think the stock is ahead of itself right now. But if the company does generate near $2 billion in rev in 2016, then we are definitely looking at $20 billion valuation at that time, minimum.


    The company is having a hard time keeping up with demand, as you know, adding over 700,000 square feet of fulfillment space this year almost doubling capacity.


    As an investor, if this case occurs, buying near the IPO will have been the best opportunity as the market is not going to discount this type of growth. The stock will most likely trade near a 25% premium as a result.


    If growth slows or Zulily runs into significant issues, then of course the price will drop. Right now though the company is on target for this trend to continue.
    28 Feb 2014, 02:41 PM Reply Like
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