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Trouble At Shutterfly? Raymond James Analyst Goes Against Wall Street Crowd With Downgrade

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Shares of Shutterfly, Inc. (NASDAQ: SFLY) were trading lower by more than 4 percent as investors and traders were selling the stock following the company's second-quarter print on Wednesday.

Shutterfly reported that it lost $0.56 per share in its second quarter, better than the $1.05 loss per share analysts were expecting. Revenue of $183.9 million also exceeding the $179.34 million analysts were expecting.

The company issued guidance and expects to lose $1.32 to $1.47 per share in the third quarter on revenue of $164.5 million to $167.5 million. Analysts were looking for the company to lose $1.34 per share on $161.44 million in the quarter.

Looking forward to the full year, the company said that it expects to lose $0.13 to $0.32 per share on revenue of $1.04 billion to $1.06 billion. Meanwhile, analysts were projecting the company to lose $0.33 per share on $1.06 billion.

Bank Of America: ‘Noisy' Results, Bullish Thesis Unchanged

Paul Bieber of Bank of America pointed out key metrics were "mixed" in the quarter.

On the positive side, Shutterfly demonstrated year-over-year gross margin expansion (in both Consumer and Enterprise) and normalized EBITDA upside. The company also bought back $45 million worth of its stock and committed to $75 million of further purchases in the coming quarter.

Bieber pointed out negative metrics including a 21 percent decline in orders at 5.0 million while a 19 percent year-over-year gain in customers at 3.13 million was short of the 3.22 million he was expecting.

Bieber is now expecting the company to record $1.06 billion in full-year revenue and report an EBITDA of $193.5 million. The analyst is also expecting the company to report an EBITDA of $226 million (along with 50 basis points of year-over-year margin expansion) in 2016.

Bottom line, with mid-teens EBITDA growth expected this year and next, the stock's multiple of around 7x is "attractive" for a "segment leader" in eCommerce.

Shares remain Buy rated with an unchanged $53 price target.

Cantor Fitzgerald: Shutterfly Grew In Double Digits, Smaller Peers Slowed

Youssef Squali of Cantor Fitzgerald commented in a note that Shutterfly reported a "generally good" second-quarter print with double-digit growth in the Shutterfly brand while issuing an "appropriately conservative" 2015 outlook.

Squali also noted that the company's continued share buyback program and potential for margin leverage in 2016 supports his bullish thesis. In addition, two Board seats have been gained by activist investors which is likely to result in more shareholder-friendly moves that will support valuation higher.

Shares remain Buy rated with a price target raised to $60 from a previous $59.

Raymond James: Outlook, Valuation Unfavorable

Finally, Aaron Kessler of Raymond James downgraded shares of Shutterfly to Market Perform from Outperform while removing a previous $51 price target.

Kessler noted that his downgrade is justified given concerns whether a slowdown in Consumer is a transient or multi-quarter issue. The company stated that most of the slowdown occurred in its smaller brands, although overall revenue came in at the low end of guidance.

Kessler also pointed out that shares of Shutterfly are trading at an approximate 8x 2016E EV/EBITDA multiple which is roughly in-line with its three-year average. The analyst stated that this valuation is justified given the "more muted" near-term consumer growth profile.

Bottom line, the analyst is expecting shares to remain range bound between $39 and $51 per share until both consumer growth and margins "normalize."

 

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Posted-In: Aaron Kessler Bank of America Cantor Fitzgerald Paul BieberAnalyst Color Downgrades Price Target Analyst Ratings

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