Breakout

Shutterfly Shares: What Is Wall Street Missing?

Breakout

Leading online photo company Shutterfly (SFLY) had a strong bounce on Thursday rising 8% to $30.98 a share after Barclays Capital reiterated its "overweight" rating on the stock. This after Jefferies Group downgraded SFLY to "hold" and cut its price target to $29.00 a share at the start of the week. So why the disparity, and does Shutterfly deserve another look as a long-term investment?

"We do all of it," the company's CEO Jeff Housenbold tells Breakout. "We're the only site that offers free, unlimited, non-compressed, non-down sampled storage, 100% satisfaction and happiness guarantee, we allow you to edit your pictures, create share sites, but we also allow you to create products from that. And we make all of our revenue today from selling products, approaching $600 million [this year]."

Housenbold says versatility, vertical integration and acquisitions, has enabled the company to grow to 50% market share since its inception in 1999. In addition to direct competitors like Hewlett-Packard's (HPQ) Snapfish, Shutterfly also goes up against the photo divisions within Wal-Mart (WMT) and Walgreen (WAG), and even views Apple (AAPL) as a competitor. He explains they're competing with these giants from a design forward and quality standpoint.

Perhaps the largest splash in the company's 13-year existence came earlier this year when they emerged as the sole bidder for Eastman Kodak's online component, Kodak Gallery. Kodak, which filed for bankruptcy in January, sold the unit for $23.8 million.

"Kodak Gallery was competing with us; a very similar service, but they were unable to may a profit from it," says Housenbold. "Our consolidation of Kodak is part and parcel of us continuing to consolidate the industry."

Kodak Gallery went dark in early July. Since then, Shutterfly has been integrating their 70 million online customers into the existing operation by migrating all 5 billion of their photos. That's no small task considering it's a 50% increase in photos added to storage.

"The integration is going very well, we're ahead of schedule on the migration," says Housenbold. Shutterfly's 15 billion photos are stored on the Cloud. The company is building out their own cloud space that Housenbold says is so cost-effective that he intends to keep the storage service free and unlimited for customers.

Shutterfly has clearly proven its staying power in an industry that has seen numerous busts. On top of that, from a valuation standpoint, it's cheap.

"What is Wall Street missing?" questions Breakout's Jeff Macke, pointing out the company's $1.2 billion market cap and a share price trading at roughly seven-times cash. "They don't get it, the stock is [trading] all over the map."

Despite Thursday's pop, the stock performance was under pressure last year and is off 40% from one year ago.

"As the photo sharing and photo taking markets have continued to explode, Shutterfly continues to get stronger," says Housenbold. "We're the only company that is profitably monetizing photos to the tune of almost $600 million this year, Wall Street has us spitting off over $100 million in EBITDA, we have cash on the balance sheet, we have no debt, and we have continue to have customers who come back and trust us with their precious memories."

Rates

View Comments (8)

Recommended for You

  • U.S. SEC to pay $30 million-plus in largest whistleblower award

    By Sarah N. Lynch WASHINGTON (Reuters) - An anonymous tipster living abroad will be receiving more than $30 million, in the largest whistleblower award ever doled out by U.S. The Securities and Exchange Commission said on Monday that the whistleblower provided crucial information that helped…

    Reuters
  • Want a Career Change in Education? Earn your M.Ed.

    A Master of Education degree can help you launch a new career as a school administrator, curriculum director and more. Why wait? Apply to GCU!

    AdChoicesGrand Canyon UniversitySponsored
  • Wall Street Has A New Worry Now That The Economy Is Recovering

    Business Insider is at the annual Bloomberg Markets Most Influential Summit on Monday, and this year  guest after guest has talked about the same worry. Early in the conference Carlyle CEO William Conway, hedge fund legend Julian Robertson, and William Dudley CEO of the Federal Reserve Bank of New…

    Business Insider
  • Apple sells more than 10 million new iPhones in first three days

    Apple Inc said it sold more than 10 million iPhones in the first weekend after its new models went on sale on Friday, underscoring strong demand for phones with larger displays. Chief Executive Tim Cook said the company could have sold even more iPhone 6 and iPhone 6 Plus models if supplies had…

    Reuters
  • Gold crashes and is now tarnished for good

    Gold shined brightly at the beginning of 2014, with bullion prices jumping by about 13% from New Year’s Day until mid-March. Last week, the precious metal settled near lows not seen since Christmas 2013.

    MarketWatch
  • Top Analyst Upgrades and Downgrades: Auxilium, BofA, Genworth, MGM, Walgreen, Wynn, Yahoo and More

    Auxilium Pharmaceuticals Inc. (AUXL) was downgraded to Hold from Buy at Stifel. Genworth Financial Inc. (GNW) was written up in Barron’s over the weekend as having 80% upside potential. Las Vegas Sands Corp. (LVS) was downgraded to Market Perform from Outperform and the price target was cut to a…

    24/7 Wall St.
  • After big gains, stocks Cramer would avoid

    If you're looking at these stocks due to chatter of a super-cycle, Cramer thinks you'll come to regret it. Because sand is such an important part of fracking , a relatively new drilling process that's made formerly hard to reach deposits of oil (New York Mercantile Exchange: @CL.1) and natural gas…

    CNBC
  • 5 Giant Myths Of Retirement Planning

    The world of retirement planning is no different. It’s been more than two decades since retirees could comfortably consider retiring off the interest they earned at the bank. If not, you’ll find yourself living a life of scarcity when your retirement life could be filled with abundance.

    Forbes
  • With FlexPath, You Can Learn At Your Own Pace

    With Capella University's new self-paced FlexPath program, you can now earn a degree without sacrificing your schedule.

    AdChoicesCapella UniversitySponsored
  • Ruble Falls on Brent Decline, Fed Concerns: Russia Reality Check

    Markets are reacting in real time to tension in Ukraine following Russia’s March incursion into Crimea and subsequent annexation of the Black Sea peninsula. The Micex Index fell 1 percent to 1,417.46 at 12:44 p.m. in Moscow, giving a loss since Feb. 28, the day before President Vladimir Putin ’s…

    Bloomberg
  • EMC Stock Soars After Investors Learn About Mega-Merger Talks With HP, Others

    For nearly a year, EMC and HP have been kicking the tires on a merger that would have created one the biggest enterprise tech companies on the planet — with over $130 billion in annual sales, according to the Wall Street Journal. Both companies were concerned they couldn't sell the deal as it was…

    Business Insider
  • Russian Industrial Giant Facing Bankruptcy?

    One of Russia's commodity producers could get crushed under the weight of its debt. U.S.-traded shares in the producer of coal, iron ore and steel, Mechel (MTL), fell 30%. The Market Vectors Russia ETF (RSX)  fell 1.83% today. The  iShares MSCI Russia

    Barrons.com
  • One Apple supplier may not get a pop from the iPhone 6

    The iPhone 6 has been a smashing success for Apple. This past weekend, Apple reported selling an astounding 10 million iPhone 6 and iPhone 6 Plus smartphones. Investors hoping to be clever about the news may consider buying shares of SanDisk, the flash memory maker that is an important supplier to…

    Talking Numbers
  • US cracks down on companies moving overseas

    The Obama administration cracked down Monday on certain overseas corporate mergers and acquisitions, aiming to curb American companies from shifting their ownership abroad to shirk paying U.S. New regulations from the Treasury Department will make these co-called corporate inversions less lucrative…

    Associated Press
  • Alibaba becomes world’s largest IPO, but stock dives

    It’s official: Alibaba is the world’s largest IPO. The title was pretty much in the bag on Friday, when the Chinese Internet juggernaut raised $21.8 billion in a blockbuster public debut, and was on its way to $25 billion after the New York Stock Exchange said the underwriting banks would sell…

    San Jose Mercury News
  • Bring Back the Awesome with a Bowl of Froot Loops®

    Who Says You Have to be a Kid to Enjoy the Great Taste of Froot Loops®? Follow Your Nose to the Sweet Aroma and Fruity Goodness of Froot Loops Today!

    AdChoicesKellogg's Froot Loops®Sponsored
  • Linn Energy: No Surprise, Everyone Loves ExxonMobil Swap

    Last week, Linn Energy (LINE) arranged to swap some assets with ExxonMobil (XOM). On the heels of a positive take from Credit Suisse last week, two more analysts murmuring sweet nothings about the deal tdoay. RBC's John Ragozzino and team note that Linn's "portfolio high-grading strategy" continues…

    Barrons.com
  • The Debit Card Danger You're Probably Forgetting

    As the American economy sunk in the wake of the Great Recession, many Americans were forced to rethink their spending habits and tossed their credit cards overboard, reaching instead for the perceived safety of their debit cards. Debit cards protect you from yourself by limiting your spending to…

    U.S.News & World Report LP
  • SPIN METER: Those changing health law numbers

    Call it health care law numerology. The Obama administration has had to revise and refine some initial enrollment numbers for health insurance sign-ups after they turned out to be too optimistic. Parsing the numbers is a new pursuit for administration officials from President Barack Obama on down,…

    Associated Press
  • 5 401(k) Gotchas to Avoid

    Between employer contributions and the ability to defer income tax on your own contributions, 401(k) plans often help you come out ahead in retirement saving. Here are five 401(k) pitfalls to watch out for: [See: 10 401(k) Facts Everyone Should Know.]

    U.S.News & World Report LP
  • Blackstone to pull out of Russia

    US private equity group Blackstone is "giving up on Russia", highlighting how even well-connected western investors are shying away from doing business in the country. The New York-based buyout group has been frustrated in its attempts to find deals in the country since its co-founder Stephen…

    Financial Times
  • 25 Things To Know About Investing By Age 25

    Most of us are just in it to bulk up our savings for retirement, make a little extra money on the side, or even just beat inflation (more on that in a minute). ... but your retirement savings are. Retirement savings, on the other hand, are invested if you put them in a retirement fund like an IRA…

    Business Insider
  • Masters in Law Degree-Non JD

    Elevate your knowledge. Advance your career. Get Your Masters in Law. Online and Accredited. Graduate in Less Than 2 years. Free Brochure!

    AdChoicesChamplain CollegeSponsored
  • Tax refunds will be cut for ACA recipients

    A significant benefit of the Affordable Care Act is the opportunity to receive money-saving tax credits up front to cut the overall cost of health insurance, but now hundreds of thousands of consumers could owe back some of that money next April.Those affected took advance payments of the premium…

    USA TODAY