Zulily Inc (NASDAQ:ZU) appears to be extremely popular among budget-conscious moms, and analysts at Canaccord Genuity say this is a good thing for investors. They believe that the company provides a “unique value proposition” for both consumers and vendors. As a result, they have initiated coverage of the online retail company with a Buy rating and $45 per share price target.
Zulily offers “inspirational shopping”
In their report dated Oct. 17, 2014, analysts Michael Graham, Maria Ripps and Austin Moldow said they think Zulily is will become a force to be reckoned with because of the unique shopping experience it provides. The online retailer kicks off shopping right at 9:01 a.m. each day.
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They think this fresh take on shopping provides affluent, value-conscious moms with a “daily, serendipitous experience.” The analysts note that shoppers are able to bargains on fashion apparel that isn’t into the mainstream retail outlets yet. They also believe that customers will continue to buy more and more from Zulily, noting that “more mature” shoppers have been noticeably increasing how often they buy from the company.
They think Zulily stock should reflect these elements positively because there’s a “relative scarcity of e-commerce investment alternatives.”
Zulily’s unique value propositions
The Canaccord Genuity team notes that consumers get a unique value proposition because of the company’s flash sale format, which is also entertaining as well. It also provides excellent deals on items that aren’t easily found elsewhere. The analysts say user data indicates that customers have been very lower and spend more and more over time.
They also say that there’s a unique value proposition for vendors because they receive “valuable exposure” to their customers. The economics are also competitive with what they would receive from traditional retailers.
Their analysis suggests that Zulily’s customers order over 12 times per year. This suggests that there’s upside to revenue estimates for the company, especially if it is able to keep older customers satisfied.
Potential risks to Zulily
Of course every company comes with risks for investors, and Zulily is no different. The Canaccord Genuity analysts say customers may come to find the online retailer’s daily events as “distracting.” They also note that other companies that follow the flash sale format experience difficulties in scaling. In addition, they say Zulily might not be able to keep enough of the right products in stock at the right times.