Is The Market Pricing Shutterfly Fairly?

Shutterfly (NASDAQ:SFLY) has performed strongly over the past couple of years, with over 6% annual growth in revenue and a 25% jump in the stock price in between 2015-2017.  The growth in the company’s Shutterfly brand was partially offset by declining revenues in non-Shutterfly brands. The decline in the consumer business in  2017 due to the shutdown of non-Shutterfly brands was reflected in the decline in gross margins. However, a notable decline in operating expenses in the second half of the year also indicates the success of the restructuring and platform consolidation strategy. The company will continue to make investments in improving the mobile and consumer platforms and infrastructure upgrades. We expect its margins to further improve in the near term, as the business consolidation is likely to boost sales and reduce overhead costs. Our price estimate of $78 suggests that the market is pricing Shutterfly slightly higher at $81, at the moment.

We have also created an interactive dashboard which shows our forecasts and estimates for the company; you can modify the key value drivers to see how they impact the company’s revenues, bottom line, and valuation.

Steps To Arrive At Our Price Estimate Shutterfly generates revenue from two segments: Consumer revenue, and Shutterfly Business Solutions revenue. In the Consumer segment, the average price per order increased slowly in the recent years. A major part of that increase can be attributed to the changed product mix, including items such as wedding and premium cards, stationery, photo prints, photo books, and photo gifts. The company had been aggressively promoting its premium product ranges, which boosted the price per order. Owing to the restructuring plans, we currently forecast the average price to reach $38.25 in 2018. Total number of orders increased 2.5x over the last 5 years. E-commerce has been evolving at a rapid pace, which provides Shutterfly a solid opportunity to tap into the growing market. Repeat orders from loyal customers and strategic partnerships with retailers such as Target and CVS have helped the company boost its order count. We forecast the order count to reach around 27.4 million by the end of 2018. Consequently, the Consumer revenue is expected around $1.05 billion.

Shutterfly Business Solutions (SBS) segment has grown at 40% annually in terms of revenue, over the past couple of years. With the help of the SBS technology platform, the company expects to scale the business further and generate $251 million in 2018. Shutterfly is establishing itself as a major contender in the corporate stationery solutions business, and we expect the segment to show promising results throughout the year.

A revenue estimate of $1.3 billion and an average share count of 33.1 million, give us revenue per share of $39.21. We expect Shutterfly’s trailing twelve-month P/sales multiple to be around 1.98 at the end of 2018, which when multiplied with expected revenue per share, gives us $77.62 as a fair price estimate.

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Research

Like our charts? Explore example interactive dashboards and create your own.