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Shutterfly Strong on Strategic Initiatives Despite Risks

Zacks

On Nov 29, we issued an updated report on the Internet-based social expression and personal publishing service provider, Shutterfly, Inc. SFLY.

The company posted better-than-expected results for third-quarter 2016 on Oct 26, wherein the loss reported was narrower than the Zacks Consensus Estimate, and revenues surpassed the same.

Prospects

Shutterfly is focused on growing its business through strategic partnerships with retailers and through acquisitions. The company has been witnessing huge growth in its enterprise segment which can be attributed to the business generated from the deal with a large Fortune 500 company last year. Management expects this deal to add $350 million to revenues over the seven year period, starting 2016.

Shutterfly is well focused on product innovation to drive growth. Last quarter, it added more products to its newly launched statement gifts category, in addition to enhancing home décor category as well as cards and stationery category. Such innovative offerings are expected to add to the company’s top line.

Moreover, the company is making progress with its Shutterfly 3.0 initative which encompasses a new integrated photo management solution, also called the All New Shutterfly. This photo management service is expected to deepen the company’s relationships with its customers and drive sales over time.

The company’s focus on improving technology-related offerings also bodes well. Shutterfly has continuously enhanced its mobile experience and optimized navigation, look and functionality of its websites. In Sep 2016, the company launched an improved Shutterfly mobile app on iOS and Android to offer a broader product catalogue, which will continue to drive a record number of customers to Shutterfly, thereby expanding its mobile footprint.

Meanwhile, the quality and scale of Shutterfly's manufacturing operations, combining its world class in-house manufacturing capabilities, make it one of the largest four color printers in the world, with its broad network of outsourced partners. The company also intends to improve operational efficiency and open new manufacturing facilities or consolidate the existing ones for future expansion.

SHUTTERFLY INC Price and Consensus


SHUTTERFLY INC Price and Consensus | SHUTTERFLY INC Quote

Concerns

Shutterfly generally incurs loss in the first three quarters and makes profit in the final quarter of every year because of the seasonal nature of its business. Additionally, it is affected by vacation and other travel trends as these drive digital camera sales. Therefore, weaknesses in the travel industry owing to macro-economic slowdown or political instability can hurt the company’s business.

Furthermore, the company has been incurring higher costs over the past few quarters, which is pressurizing its margins. These costs primarily pertain to company’s accelerated development of new production facilities along with a rise in the manufacturing, labor and training costs.

Shutterfly currently has a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other well-performing stocks in the broader Computer and Technology sector include Everyday Health, Inc. EVDY, Tucows, Inc. TCX and Facebook, Inc. FB.

Everyday Health has next fiscal-year growth estimate pegged at 151.2% compared with the industry average of 17.5%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Tucows has surpassed earnings estimates in three of the four trailing quarters with an average beat of 11%. It has a Zacks Rank #2.

Brightcove has recorded an earnings beat in each of the last four quarters with an average positive surprise of 21.11%. It also has a Zack Rank #2.

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