Vistaprint Slips to Strong Sell - Analyst Blog

On May 3, Zacks Investment Research downgraded business services provider Vistaprint N.V. VPRT to a Zacks Rank #5 (Strong Sell) from a Zacks Rank #4 (Sell) primarily due to downward estimate revisions and a sharp fall in the share price following its dismal third-quarter fiscal 2014 earnings release.

Vistaprint's share prices have gone downhill by 26.6% since Apr 29, when its third quarter fiscal 2014 results were declared. Despite the downtrend, the company still has the potential to drive the stock up. The stock is currently trading at a forward P/E of 20.0x and has long-term earnings growth expectation of 21.3%.

Why the Downgrade?

Vistaprint reported unimpressive third-quarter fiscal 2014 results with revenues and earnings declining year over year due to headwinds in core markets. Net income for the reported quarter dropped sharply to $1.4 million from $5.9 million in the year-earlier quarter. On a per-share basis, earnings for third-quarter fiscal 2014 plummeted to 4 cents from 17 cents in the year-ago quarter.

Excluding one-time items, adjusted earnings for the reported quarter halved to $8.3 million or 24 cents per share from $16.9 million or 48 cents per share in the prior-year period. The quarterly adjusted earnings were way below the Zacks Consensus Estimate of 46 cents.

Total revenue in third-quarter fiscal 2014 decreased 1% year over year for the first time in over 14 years to $286.2 million. Revenues also missed the Zacks Consensus Estimate of $310 million.

Over the last 7 days, most of the earnings estimates for Vistaprint have been revised downward for fiscal 2014 as well as for fiscal 2015. This seems to be fallout of a negative earnings surprise of 84.8%. Moreover, gross margin in the reported quarter fell to 64.7% from 65.5% in the year-ago period. Operating income also decreased to $5.2 million from $9.7 million in the prior-year period.

Other Stocks to Consider

Other stocks that look promising and are worth looking into now include Genpact Ltd. G, Hudson Global, Inc HSON and Professional Diversity Network LLC IPDN, each carrying a Zacks Rank #2 (Buy).