Why Zulily Inc Shares Jumped Today

Is Zulily's recent stock move meaningful? Or just another movement?

Jun 25, 2014 at 3:10PM

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Zulily Inc (NASDAQ:ZU) were back in style today, climbing as much as 11% after scoring an upgrade from Goldman Sachs.

So what: The volatile flash-sales retailer got bumped up to buy from neutral, as Goldman said Zulily's "hyper growth warrants attention." Indeed, revenue at the website, which targets new moms, grew by 87% in its most-recent quarter as the flash-sales model, which offers deep discounts for a limited time, has proven to be immensely popular. Goldman also noted that the company is on its way to becoming only the third retailer in U.S history to hit $1 billion in its five years of operations, the other two being Amazon.com and Old Navy.  

Now what: Goldman Sachs is one of the country's most-respected financial institutions, and when its analysts upgrade a stock, the move gets attention. Investors, however, shouldn't heed its advice blindly. Zulily shares have been extraordinarily volatile since its $22 IPO in November, peaking at $73 in February before tumbling 30% on a weak earnings report in May. Shares are now near $40 after today's jump. Clearly, Zulily is one of the more exciting companies to come on the market recently, but the company is barely profitable despite the sharp revenue increases. If its sales growth keeps up, the stock should jump in tandem, but investors should expect a wild ride.

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