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Shutterfly Well Poised on Restructuring & Lifetouch Buyout
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Shutterfly, Inc. is a leading provider of Internet-based social expression and personal publishing service. Through its broad range of leveraged technology, manufacturing, web-design and merchandising capabilities, customers can share, print and preserve their digital photographs.
The company reported strong fourth-quarter 2017 results, beating the Zacks Consensus Estimate on both counts. Notably, the company has beaten the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 12.99%.
In the past 30 days, the Zacks Consensus Estimate for the first quarter of 2018 has decreased from a loss of 84 cents to a loss of 88 cents. Notably, owing to the seasonal nature of its business, Shutterfly usually incurs losses in the first three quarters followed by earnings in the last quarter of the year.
The stock has returned 67.4% in the past year, outperforming the industry’s 63.6% rally.
Platform Consolidation and Restructuring to Control Expenses
The company completed platform consolidation and restructuring of its consumer business in the fourth quarter of 2017. In order to focus more on profitable and cost-effective brands, it migrated the smaller brands to the Shutterfly brand and platform that yields higher returns than non-Shutterfly brands and platforms.
Tiny Prints, the company’s second-largest consumer brand was shut down in June 2017, after migrating Tiny Prints’ customers to Shutterfly.com. The company has created a Tiny Prints boutique on a dedicated tab on Shutterfly.com. This transition is expected to bring significant cost efficiencies to the company. The Wedding Paper Divas and MyPublisher sites have been shut down too and marketing and promotions are in full swing to efficiently transition the existing customers.
BorrowLenses was also put under strategic review. Ultimately, the company decided to retain and operate this business as has a modest growth rate and generates positive cash flow. The company also announced plans to focus on the new Shutterfly Wedding Store as part of its wedding strategy, including a premium Wedding Paper Divas-branded stationery collection.
Thus, the company is now investing in a single Consumer platform, with all customers gaining from investment in the Shutterfly.com site. This reduces complexities of usage to a large extent, thereby increasing customer satisfaction. Also, one of the largest structural changes made by the company is to reduce its workforce by approximately 13% or 260 employees. This is expected to result in an annualized cost decrease of approximately $25 million.
Massive Strategic Acquisition to Boost the Top Line
On Jan 31, 2018, Shutterfly said that it has reached a deal to acquire Lifetouch, a privately held online photography company for $825 million cash. The deal is expected to close in the second quarter of 2018.
On the strength of that deal, the company expects to add approximately $935 million to its net revenues and $100 million to its adjusted EBITDA over the 12 months following the closure of the deal. By 2020, the company targets a minimum $450 million of adjusted EBITDA.
Going Forward
While restructuring and brand simplification will help Shutterfly’s consumer segment with increased operational efficiency and tighter expense control, the Lifetouch buyout is expected to significantly boost its customer base and consequently revenues.
If Shutterfly successfully achieves its goals associated with these two massive efforts, it would mark quite a turnaround for the company as it has grappled with high expenses and soft consumer spending environment for some time now.
Other top-ranked stocks in the broader technology sector include Micron Technology Inc. (MU - Free Report) , Lam Research Corporation (LRCX - Free Report) and The Trade Desk Inc. (TTD - Free Report) , all sporting a Zacks Rank #1.
Long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected to be 10%, 14.9% and 25%, respectively.
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
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Shutterfly Well Poised on Restructuring & Lifetouch Buyout
Shutterfly, Inc. is a leading provider of Internet-based social expression and personal publishing service. Through its broad range of leveraged technology, manufacturing, web-design and merchandising capabilities, customers can share, print and preserve their digital photographs.
The company reported strong fourth-quarter 2017 results, beating the Zacks Consensus Estimate on both counts. Notably, the company has beaten the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average positive surprise of 12.99%.
In the past 30 days, the Zacks Consensus Estimate for the first quarter of 2018 has decreased from a loss of 84 cents to a loss of 88 cents. Notably, owing to the seasonal nature of its business, Shutterfly usually incurs losses in the first three quarters followed by earnings in the last quarter of the year.
The stock has returned 67.4% in the past year, outperforming the industry’s 63.6% rally.
Platform Consolidation and Restructuring to Control Expenses
The company completed platform consolidation and restructuring of its consumer business in the fourth quarter of 2017. In order to focus more on profitable and cost-effective brands, it migrated the smaller brands to the Shutterfly brand and platform that yields higher returns than non-Shutterfly brands and platforms.
Tiny Prints, the company’s second-largest consumer brand was shut down in June 2017, after migrating Tiny Prints’ customers to Shutterfly.com. The company has created a Tiny Prints boutique on a dedicated tab on Shutterfly.com. This transition is expected to bring significant cost efficiencies to the company. The Wedding Paper Divas and MyPublisher sites have been shut down too and marketing and promotions are in full swing to efficiently transition the existing customers.
BorrowLenses was also put under strategic review. Ultimately, the company decided to retain and operate this business as has a modest growth rate and generates positive cash flow. The company also announced plans to focus on the new Shutterfly Wedding Store as part of its wedding strategy, including a premium Wedding Paper Divas-branded stationery collection.
Thus, the company is now investing in a single Consumer platform, with all customers gaining from investment in the Shutterfly.com site. This reduces complexities of usage to a large extent, thereby increasing customer satisfaction. Also, one of the largest structural changes made by the company is to reduce its workforce by approximately 13% or 260 employees. This is expected to result in an annualized cost decrease of approximately $25 million.
Shutterfly, Inc. Total Expenses (TTM)
Shutterfly, Inc. Total Expenses (TTM) | Shutterfly, Inc. Quote
Massive Strategic Acquisition to Boost the Top Line
On Jan 31, 2018, Shutterfly said that it has reached a deal to acquire Lifetouch, a privately held online photography company for $825 million cash. The deal is expected to close in the second quarter of 2018.
On the strength of that deal, the company expects to add approximately $935 million to its net revenues and $100 million to its adjusted EBITDA over the 12 months following the closure of the deal. By 2020, the company targets a minimum $450 million of adjusted EBITDA.
Going Forward
While restructuring and brand simplification will help Shutterfly’s consumer segment with increased operational efficiency and tighter expense control, the Lifetouch buyout is expected to significantly boost its customer base and consequently revenues.
If Shutterfly successfully achieves its goals associated with these two massive efforts, it would mark quite a turnaround for the company as it has grappled with high expenses and soft consumer spending environment for some time now.
Zacks Rank and Other Stocks to Consider
Shutterfly sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Other top-ranked stocks in the broader technology sector include Micron Technology Inc. (MU - Free Report) , Lam Research Corporation (LRCX - Free Report) and The Trade Desk Inc. (TTD - Free Report) , all sporting a Zacks Rank #1.
Long-term earnings growth rate for Micron, Lam Research and The Trade Desk is projected to be 10%, 14.9% and 25%, respectively.
Breaking News: Cryptocurrencies Now Bigger than Visa
The total market cap of all cryptos recently surpassed $700 billion – more than a 3,800% increase in the previous 12 months. They’re now bigger than Morgan Stanley, Goldman Sachs and even Visa! The new asset class may expand even more rapidly in 2018 as new investors continue pouring in and Wall Street becomes increasingly involved.
Zacks has just named 4 companies that enable investors to take advantage of the explosive growth of cryptocurrencies via the stock market.
Click here to access these stocks >>