We upgrade our recommendation on
Liberty Interactive Corp.
) to Neutral based on the improved performance of the QVC and
eCommerce segments. The company reported mixed financial results
for the first quarter of 2013. While revenues surpassed the Zacks
Consensus Estimate, net income fell below the same.
Why the Upgrade?
We believe that the TV home shopping business will continue to
flourish in the near future. The QVC division of Liberty
Interactive has successfully transformed itself into a powerful
global brand, which may boost Liberty Interactive's revenues in
the double-digits. The strategic move taken by management to
offer QVC programs on wireless platforms, such as smartphones and
tablets, was a huge success.
Management believes that Liberty Interactive's online sales in
the U.S. will constitute more than 50% of the total revenue by
2014. The major thrust is coming from the growing adoption of
high-end smartphones in the U.S. QVC is about to introduce a
synchronized content for its mobile applications. This feature
will enable smartphone users to get real time information about a
product which is broadcasted on the TV show. This will promote
online sales further.
According to a report of Internet Retailer, after
), QVC was the second-largest e-commerce retailer in the U.S. in
2012. QVC has become the market leader in the $8 billion TV
home-shopping business. It commands an estimated 69% market
share, far ahead of its nearest rivals,
ValueVision Media Inc.
). The TV home-shopping business has a stable customer base,
which generally constitutes of women.
Exposure to international markets, such as Japan, Germany,
Italy, the U.K. and China will enable QVC to achieve a high rate
of growth. QVC is gradually expanding its presence in these
developed markets. Currently, international markets provide 35%
of QVC's yearly revenues. The company is expecting this figure to
reach 50% within the next 5 years.
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