RBC Capital Downgrades Zulily, Inc (ZU) to Sector Perform

RBC Capital downgraded Zulily, Inc (NASDAQ: ZU) from Outperform to Sector Perform with a price target of $18.00 (from $45.00) after the company posted a Miss and Lower Q4 – with both Revenue and EBITDA well below RBC/Street expectations, citing fulfillment inefficiencies and elevated churn among newer cohorts.

Analyst Mark Mahaney highlighted the following keys: 1) Deteriorating Fundamentals: Revenue growth decelerated from 72% in Q3 to 52% in Q4 and is expected to drop to 33%ish in Q1, while Gross Margin fell 80 bps Y/Y and EBITDA Margin dropped 170 bps. 2) Deteriorating Metrics: Net Customer Ads were 400K vs. 500K in Q4:13, Orders per Active Customer dropped from 1.64 in Q4:13 to 1.45 in Q4:14, and Marketing Spend per Net Customer Ad soared 138% Y/Y to $71. 3) CFO Resigning: CFO Marc Stolzman is leaving in March, without much explanation. 4) $250MM Buyback Authorized.

The firm's '15 Revenue declines by 9% to $1.68B, and our ’15 EBITDA estimate decreases by 26% to $76MM.

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 $19.89 yesterday.

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