Zulily (ZU) PT Slashed to $12 at RBC Capital

RBC Capital analyst Mark Mahaney reiterated a Sector Perform rating and cut his price target on Zulily, Inc (NASDAQ: ZU) to $12.00 (from $18.00) following weak Q1 results and lower guidance.

The keys in the quarter, according to Mahaney:

Positives: 1) Solid Margins – Gross Margin of over 30% (L-T target on the IPO roadshow) came in well above RBC/Street at 26.8%/26.5%. Q1 EBITDA Margin of 1.4% also above RBC/Street, both at negative 1.4%, aided by a pullback (temporary) in marketing, but offset by SG&A de-leverage. 2) Avg. Order to Ship Time – Decreased to 11.9 days in Q1 from 13.7 in Q4:14, with continued progress to 10.5 last week. 3) Avg. Order Value – $56.26, well above the Street at $49.53.

Negatives: 1) Reduced Guide – Q2 Rev / EBITDA guidance of $285-300/8-12MM well below Street ests of $362/15MM; FY15 reduced to Revenue of $1.3-1.4B & EBITDA of $55-70MM from $1.5-1.65B and $55-80MM, respectively. 2) Deteriorating Fundamentals – Rev growth decelerated from 52% in Q4 to 29% in Q1, with 3% Y/Y in Q2:15 at the mid-pt of Guide. 3) Deteriorating Metrics – Net Customer Ads were 100K vs. 500K in Q1:14 & Orders per Active Customer dropped to 1.27 from 1.59 in Q1:14.

The firm's ’15 Revenue declines by 17% to $1.35B, and our ’15 EBITDA estimate decreases by 14% to $65MM.

For an analyst ratings summary and ratings history on Zulily, Inc click here. For more ratings news on Zulily, Inc click here.

Shares of Zulily, Inc closed at $11.82 yesterday.

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