Zulily’s stock price surged as Alibaba bought a stake in the company
On Friday, May 8, Alibaba Group (BABA) bought 4.8 million class A shares of Zulily (ZU) worth approximately $58 million. Analysts speculate that this position in Zulily, which is valued at more than $150 million, is part of Alibaba’s expansion plans in the US.
Last week, Alibaba in its US Securities and Exchange Commission filing disclosed that it now owns 11.5 million class A shares of Zulily, which is equivalent to a 9.2% stake in the company. Following the announcement of Alibaba’s disclosure of a 9.2% stake in the company, Zulily’s stock rose by 12.5% and closed at $13.30 on Friday. On Monday, Zulily closed at $13.98, or 5.2% higher.
Zulily’s stock had dipped by 40% since the beginning of this year on account of poor quarterly reports and its inability to retain its active customers. Alibaba’s stake in the company might turn around its revenues and improve its earnings growth. This deal could also help Alibaba to expand its footprint in markets outside of China (FXI).
Last month, Amazon (AMZN) also announced that its 1Q15 earnings beat its own midpoint estimates for both revenues and operating income. Amazon’s stock also went up by 14% after better-than-expected 1Q15 earnings. Read more about Amazon’s earnings in detail in Market Realist’s article Amazon’s Impressive 1Q15 Earnings Defy Estimates. eBay’s (EBAY) stock also soared by 5% following the announcement of better-than-expected 1Q15 earnings.