A Look At Shutterfly’s Projected Growth

Shutterfly (NASDAQ:SFLY) has seen impressive growth in recent years. The company reported record revenue ($1.2 billion,+5% year-over-year) in 2017 and expects to grow by nearly 9% annually, over the next two years. The completion of its restructuring initiatives and platform consolidation strategy should improve its customer experience by consolidating its platform and creating an integrated offering. While this might create issues in the short term, we believe this strategy should drive some growth over the long run with the optimization of technology initiatives and a better focus on brands. Addditionally, the company’s plan to continue making investments in improving the mobile and consumer platforms and infrastructure upgrades should further drive the sales.

Competition for Shutterfly is intensifying. In September 2016, Amazon launched a photo printing service called “Amazon Prints” aimed toward its Prime customers who already get free photo storage on its site. The photo printing feature was added to Google Photos wherein users can create a photo book at competitive prices, using their photos uploaded on the app. While Shutterfly has had a decent performance, we believe the competition from Google Photos can impact its user growth. Shutterfly is betting big on its restructuring initiatives to improve the customer experience.

We have created an interactive dashboard which shows our forecasts for the company’s revenues. You can modify the different revenue drivers to see how changes impact the company’s expected revenues.

Shutterfly’s Segment Revenue Growth

Shutterfly generates revenue from two primary streams – Consumer segment and Shutterfly Business Solutions (SBS) segment. The company’s total order count reached 26.3 million in 2017, and we expect the figure to grow at nearly 4% annually. Repeat orders from loyal customers and strategic partnerships with retailers such as Target and CVS have helped the company boost its order count. Increased involvement of E-commerce provides a huge opportunity for Shutterfly. Moreover, with the increase in mobile app downloads (over 4 million in 2017), we expect a strong growth in orders.  The average price per order is expected to increase by 1%  annually, amid changing product mix, including items such as wedding and premium cards, stationery, photo prints, photo books, and photo gifts. Consequently, we estimate Consumer revenue to grow by 5% annually going forward.

Shutterfly Business Solutions (SBS) generated $193 million in 2017 and we expect it grow by 30% annually. Increased orders from existing clients and new client additions drove revenues from this segment. The company expects to further grow the business with the help of the SBS technology platform. Shutterfly is establishing itself as a major contender in the corporate stationery solutions business.