FBR Capital Remains Bullish on Liberty Interactive (QVCA) Following Announced Zulily Acquisition
FBR Capital reiterated an Outperform rating and $32.00 price target on QVC Group (NASDAQ: QVCA) following announced deal to acquire Zulily for $2.4 billion of cash and stock. Analyst Barton Crockett said that the acquisition announced before the market opened on August 17th, creates a new possibility of growth at a QVC that, until now, has had muted growth prospects.
Crockett commented, "QVC's surprising news pre-open August 17 of a deal to acquire Zulily for $2.4 billion of cash and stock creates a new possibility of growth at a QVC that, until now, has had muted growth prospects. We see the price paid for this growth call option -- 2% to 4% pre-synergy dilution of the EV/EBITDA multiple and free cash flow per share, -- as modest, and the argument for synergy potential -- albeit thinly quantified -- as interesting. Execution risks are meaningful. Zulily's stock is down because of execution problems, and Liberty, to date, has not had a successful track record in e-commerce acquisitions. But Zulily, unlike earlier Liberty e-commerce acquisitions, can be integrated tightly into QVC's core business. In 2007 (its last year of big e-commerce acquisitions), Liberty was buying e-commerce businesses like backcountry.com and bodybulding.com that got it into verticals that bore little relationship to QVC. This deal -- acquiring a specialist in marketing original products to moms -- looks closer to QVC's wheelhouse, and thus much likelier to succeed. And smart money investors like Alibaba have seen potential in Zulily, buying into the stock recently. This drives us to have an initially favorable view of the deal."
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Shares of QVC Group closed at $30.26 yesterday.