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QVC And Zulily Join Up: What's Next?

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Liberty Interactive: Zulily's Growth Trajectory Could Be Very Strong, Playing For Long-Term Value

Before the market open on Monday, Liberty Interactive Corp (NASDAQ: QVCA) announced its plans to acquire Zulily Inc (NASDAQ: ZU) in a cash and stock transaction for $18.75 per share, which values the latter company at approximately $2.4B.

In a report published Tuesday, Brean Capital analyst Tom Forte said that the deal, which would be attributed to Liberty Interactive’s tracking stock, QVCA, was expected to close in 4Q15. “We are bullish on the transaction as it combines two companies that offer consumers differentiated merchandise and have large and loyal customer bases,” Forte wrote.

Brean Capital reiterated a Buy rating on QVCA, with a price target of $37. Forte added that offering consumers differentiated merchandise was “one of the keys” to competing against Amazon.com, Inc. (NASDAQ: AMZN) “for the future of retail.”

Forte mentioned the implications that the deal had for other Consumer Technology stocks:

  • QVCA was unlikely to acquire HSN, Inc. (NASDAQ: HSNI) at least in the near term
  • There may be additional M&A transactions in the e-commerce sector. Potential targets may include: Chegg Inc (NYSE: CHGG), Coupons.Com Inc (NYSE: COUP), Etsy Inc (NASDAQ: ETSY) (Rated: Buy), GrubHub Inc (NYSE: GRUB) (Rated: Buy), Overstock.com, Inc. (NASDAQ: OSTK), RetailMeNot Inc (NASDAQ: SALE), Shopify Inc (NYSE: SHOP), TrueCar Inc (NASDAQ: TRUE), and Wayfair Inc (NYSE: W). Private companies that could be potential targets include Airbnb, Bonobos, Delivery.com, Fanatics, Instacart, Jet.com, JustFab, Lyft, Pinterest, The Tie Bar, Uber, and Warby Parker.
  • Other Potential Suitors: “First, the usual suspects, companies we would always consider to be on the hunt for an e-commerce deal to expand their efforts or complement their existing businesses:” Alibaba Group Holding Ltd (NYSE: BABA), Amazon, Apple Inc. (NASDAQ: AAPL) (Rated: Buy), eBay Inc (NASDAQ: EBAY), Facebook Inc (NASDAQ: FB) (Rated: Buy), Google Inc (NASDAQ: GOOGL), Groupon Inc (NASDAQ: GRPN) (Rated: Buy), Nordstrom, Inc. (NYSE: JWN) (Rated: Hold), Priceline Group Inc (NASDAQ: PCLN), Rakuten Inc (TYO: 4755), Wal-Mart Stores, Inc. (NYSE: WMT), Yahoo! Inc. (NASDAQ: YHOO), and Yelp Inc (NYSE: YELP) (Rated: Buy). “Second, traditional retailers we believe could improve their efforts via e-commerce deals:” Kohl's Corporation (NYSE: KSS), Macy's, Inc. (NYSE: M), and Target Corporation (NYSE: TGT).


“One interesting footnote on this transaction is that Alibaba acquired a minority interest in Zulily, which currently stands at 17.0%,” the Brean Capital report added.

Latest Ratings for QVCA

DateFirmActionFromTo
Nov 2017UBSMaintainsBuy
Sep 2017CitigroupDowngradesBuySell
Sep 2017DA DavidsonInitiates Coverage OnBuy

View More Analyst Ratings for QVCA
View the Latest Analyst Ratings

Posted-In: Brean CapitalAnalyst Color Reiteration Analyst Ratings

 

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