NEW YORK (TheStreet) -- Alibaba (BABA - Get Report) has been steadily investing in more and more U.S. companies. Its latest target is e-commerce company Zulily (ZU). And all signs point to a future expansion into Western markets, although a specific push into the U.S. is likely further off.
On Friday, The Wall Street Journal reported that Alibaba now holds a 9.3% stake in Zulily, valued at more than $150 million. According to The Journal, Alibaba is not looking to fully acquire Zulily, but the move is certainly raising some eyebrows.
In an email, an Alibaba representative said that the company "continues to focus on making investments in forward-thinking, innovative entrepreneurs that are developing leading products and technologies."
"We support innovation and entrepreneurship and believe we can share and learn from these types of partners," the spokesperson added. "The Zulily team has a compelling vision for the future that is consistent with our investment philosophy."The acquisition of a Zulily stake follows other recent Alibaba investments in U.S. companies, including e-commerce startup Jet, messaging-app company Snapchat and ridesharing startup Lyft. While it's unlikely that the Chinese e-commerce giant is heading to America soon, it's hard to ignore the signs.
"Alibaba is not yet ready to move into the domestic US market, but does have longer term plans to expand into domestic western markets and is planting some small flags to facilitate the longer-term move," Wedbush Securities analyst Gil Luria said.
On Monday Zulily shares rose 10%, to $14.64, following a long period of decline, thanks to lower sales and customer growth. (By 2 p.m. EDT, however, the shares were priced only $14.27.) The decline in Zulily's share price allowed Alibaba to purchase a larger stake of the firm at a discount on the belief that it has long-term potential.
Luria said he expected to see more of these small investments, all of which could help Alibaba build "the foundation for a broader expansion." Such investments can serve as a learning experience for Alibaba and help the Chinese company become more accustomed with the U.S. market before making bigger moves.
"At their core, I think the investments in Zulily and Jet are about better understanding the tendencies of the U.S. online shopper and what must be done to better compete with Amazon," Morningstar analyst R.J. Hottovy said.
While Alibaba has already broken into the U.S. by offering its cloud services, the firm has only a minor presence in the e-commerce market in America: Its 11 Main holding provides an online marketplace for specialty shops and boutiques. The site emerged from Alibaba's 2010 acquisitions of Auctiva and Vendio.
In the meantime, Alibaba may look to Europe and South America for expansion beyond China.
"I would expect Alibaba to first exhaust the hyper growth of the Chinese consumer, then other emerging markets like Brazil and Russia that don't have as much competition and only then target large western market, possibly 3-5 years down the road," Luria said.
Alibaba recently reported its fourth-quarter earnings, beating analysts expectations with 45% growth in revenue year over year, causing its shares to jump about 8% on Thursday. By Monday at 2:03 p.m. EDT, Alibaba shares were priced $87.40. The company also announced a new CEO, Daniel Zhang, who will take over for the outgoing chief, Jonathan Lu.