Shutterfly (SFLY) Firms Up But Analysts Remain Divided

Shares of Shutterfly (SFLY: Charts, News) rallied briefly at the end of last week, after analysts at Barclays Capital reiterated their "overweight" rating on the online photo company's stock. Earlier last week, however, Jefferies Group analysts downgraded Shutterfly to "hold" and lowered its price target to $29.

Shutterfly has fallen 39% over the past twelve months, but still trades at a feverish 235 times past earnings. Shutterfly offers online photo services that integrate with locally stored collections and albums on Facebook (FB: Charts, News) and Google's (GOOG: Charts, News) Picasa, which the company then produces into personalized photo products, such as photo books, greeting cards and stationery. Since going public in October 2006, shares have doubled, after an extremely rocky ride over the past six years. Daily Chart
In a recent interview, CEO Jeff Housenbold touted the strength of Shutterfly's market share, which has steadily risen to 50% since the company's inception in 1999. Housenbold expects Shutterfly to maintain its commanding lead over direct competitor Snapfish, a subsidiary of Hewlett-Packard (HPQ: Charts, News), as well as photo services at Wal-Mart (WMT: Charts, News) and Walgreen (WAG: Charts, News). Shutterfly spent $23.8 million earlier this year when it acquired bankrupt photo giant Eastman Kodak's online segment, "Kodak Gallery." "Our consolidation of Kodak is part and parcel of us continuing to consolidate the industry," stated Housenbold. After Kodak Gallery went offline in July, Shutterfly has been integrating Kodak's 70 million online customers into its existing operations - a gargantuan task that requires the migration of over 5 billion photos. This increases Shutterfly's stored photos by 50%, from 10 billion to over 15 billion, all stored in its cloud service. Housenbold has stated that its cloud space service, although very resource-intensive, is cost-effective due to the number of purchases originating from photos stored in the cloud. Housenbold intends to keep Shutterfly's cloud services free with unlimited storage for all customers. Shutterfly also expanded its global reach in May by acquiring Photoccino, a developer of photo ranking software based in Haifa, Israel. The terms of the acquisition were not disclosed. In its second quarter earnings, posted on July 25, Shutterfly posted a loss of 27 cents per share, beating the analyst consensus of a loss of 35 cents per share. Shutterfly's revenue increased by 30.6% from the prior year quarter. For Shutterfly's third quarter earnings, the company expects a GAAP-adjusted loss between $14.2 million to $15.7 million, or 41 to 44 cents per share, on revenue between $89.5 million to $91.5 million. Non-GAAP earnings will come in at loss between $14.2 million to $15.7 million. For the full year, Shutterfly expects to generate $582 million to $592 million in revenue, with over $100 million in EBITDA. The company currently has no debt. Shares of Shutterfly currently trade at 59 times forward earnings with a 5-year PEG ratio of 9.7. These unclear fundamental signals, which indicate that the stock is both overvalued and facing sluggish growth ahead, has kept many investors away from the stock. In addition, the company has yet to produce a profit this year, and is down over 51% from its all-time high of $63.10, which it achieved back last July. Shutterfly does not currently pay a dividend. Other News About SFLY Shutterfly Protecting Turf, Growing Market, Says CEO Shutterfly's CEO touts the company's strengths. Shutterfly Shares: What Is Wall Street Missing? Analysts remain starkly divided regarding Shutterfly's growth prospects. Other Stocks in the News AIG Bailout Profits Came With a Price AIG's bailout continues to push delayed ripples through the market. Taco Bell tops Ranking of Engaging Facebook Posts, Gets '60 Minutes' Mention Taco Bell gets some positive PR due to buzz-worthy new products. Copyright 2012 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Sep 11, 2012
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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