Shutterfly’s (NASDAQ:SFLY) stock is down almost 20% this month, and that weakness will likely be exacerbated after management revised its guidance downward for 4th quarter revenue and earnings. [1] The Q4 holiday season is traditionally the most crucial period for Shutterfly, with holiday spending driving its primary business – personalized products and services. Shutterfly enables users to store and share their own images and create custom printed photobooks, cards and albums. These products are commonly given as gifts, so the 4th quarter is typically a robust one for the company. That makes the revised guidance all the more discouraging. Shutterfly competes primarily with services like HP’s (NYSE:HPQ) Snapfish, Kodak’s EasyShare Gallery, American Greetings’ Photoworks and Webshots brands, and now Apple (NASDAQ:AAPL), which recently ventured into this business with the Cards app on iOS.
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Lowered Earnings Guidance Hammers Stock
Shutterfly’s management now estimates that Q4 net revenues will come in between $259 million and $264 million, compared to the previous guidance of $270.5 million to $275.5 million. Management now expects adjusted EBITDA to range from $84 million to $88 million, while previous guidance was for $96.3 million to $101.1 million.
Shutterfly President and CEO Jeffrey Housenbold said:
“We believe that the uncertain economic environment, combined with heavy competitor discounting throughout the peak holiday shopping season, contributed to the net revenue and adjusted EBITDA shortfalls.” [1]
Shutterfly’s stock price has dropped nearly 20% this month, and more than 25% from the near-$31 levels it reached in early December, as competition in the personalized cards space has intensified, with Apple entering the market and HP’s Snapfish slashing prices. The stock is down over 60% from its 2011 high back in April, but some of that is attributable to the broader market sell-off.
We currently have a $40 Trefis price estimate for Shutterfly, which is nearly 70% above its market price.
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Notes:- Shutterfly Provides Preliminary Fourth Quarter 2011 Financial Information, Press Release [↩] [↩]
