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Why Shares of Zulily, Inc. Soared

By Jeremy Bowman – Feb 25, 2014 at 3:00PM

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Is this meaningful or just another movement?

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 zooming higher today, gaining as much as 47% after a breakout fourth-quarter earnings report.

So what: In its first earnings report as a public company, the daily-deals merchant said earnings per share jumped from $0.03 a year ago to $0.10, well ahead of analyst estimates, while revenue doubled to $257 million, also crushing the consensus at $225.5 million. Active customers also doubled, year over year, to 3.2 million. CEO Darrell Cavens called 2013 a "great year" for the company, saying, "It's clear that our team's obsession with offering amazing products at a great value is driving tremendous performance." He also promised to invest to maximize the long-term potential of the company.

Now what: Guidance for the coming year was not as strong, as the company expected revenue of $1.1 billion to $1.5 billion for 2014, in line with estimates at $1.11 billion, and sees a loss of -$0.01 to -$0.04 a share in the first quarter, worse than expectations of a $0.03-per-share profit. By targeting moms, Zulily may have found a successful formula in the cutthroat daily-deals world, but the plight of companies like Groupon and LivingSocial has shown that success in this industry can easily slip away. Zulily's valuation also makes it highly risky, as it's already worth $7 billion, more than even Groupon. I'd suspect the strong quarter was largely due to deal-hunting during the holiday season. We'll learn if this company's for real or not at its next earnings report in the spring.

Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool.  We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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