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However, challenging economic conditions and a fierce discounting war among the competitors are eating up the company’s margins. The company faces competition from the likes of LookSmart Ltd. (NasdaqGM:LOOK - News), Snapfish owned by Hewlett-Packard Co. (NYSE:HPQ - News) and Photoworks and Webshots brands of American Greetings Corp. (NYSE:AM - News). Shutterfly will continue to discount deeper in first-quarter 2012 than the year-ago level that will hit the top and bottom lines. In addition, the upcoming quarter is seasonally weak.
Shutterfly currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock.