Raymond James Upgrades Shutterfly After Q1 Print

Shutterfly, Inc. SFLY reported first-quarter results which prompted Raymond James to become bullish on the stock.

The Analyst

Raymond James' Aaron Kessler upgraded Shutterfly from Market Perform to Outperform with a new $56 price target.

The Thesis

Shutterfly's first-quarter report was mostly in line with expectations, including a 63-percent growth in revenue year-over-year to $325 million and an EBITDA loss of $45 million, Kessler said in the note. The company's adjusted EBITDA guidance of $400-$450 million, which was delivered in the proceeding quarter looks "very achievable."

Kessler said the company needs to show a "reasonable" baseline growth rate of 3-5 percent in the coming years to hit its 2021 objectives. Other near-term goals include $42 million in manufacturing synergies from the Lifetouch acquisition along with reduced integration costs and corresponding $25 to $33 million in EBITDA from revenue synergies.

The core Shutterfly brand remains healthy and a big part of the slowdown in the back half of 2018 is due to a move away from low ROI free orders, according to the analyst. The core brand's growth has since grown at a "relatively stable" rate, which should improve in the back half of 2019 and into next year.

Shutterfly's stock also has upside potential from private equity groups who are reportedly evaluating an acquisition of the company.

Price Action

Shares of Shutterfly were trading higher by more than 4 percent to $44.02 at time of publication.

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Lifetouch Acquisition Is A Game Changer For Shutterfly, Goldman Sachs Says In Upgrade