Shares of Shutterfly Inc. (SFLY - Analyst Report) hit its 52-week high of $45.90 on Apr 12 and eventually closed at $44.97, generating a return of approximately 45.8% year-to-date. Shutterfly’s shares have been riding high since it reported solid fourth quarter results on Feb 5. Average volume of shares traded over the last three months came in at approximately 895K.
Factors Driving Momentum
A strong business model, a string of acquisitions and potential for future share growth boosted the shares of this Internet-based social expression and personal publishing service company.
Shutterfly offers innovative products and services and has ample manufacturing capacity. Shutterfly’s fourth-quarter 2012 earnings of $1.40 per share breezed past the Zacks Consensus Estimate by 38.6% and the year-ago result by 44.3%. Increased revenues (up 33%) along with efficient cost containment led to the beat.
Shutterfly is focused on growing its business through strategic partnerships with retailers and through acquisitions. Some of Shutterfly’s latest acquisitions include ThisLife in Jan 2013; Fuji Film’s photo creating and sharing website SeeHere.com in Oct 2012 and Kodak Gallery online photo services (formerly known as Ofoto) in May 2012. Management also expects Kodak to deliver a significantly higher EBITDA margin in fiscal 2013.
The company’s market share is growing steadily. Its market leading position is driven by its ability to launch new products and services, expand its customer base, improve operational efficiency and seamlessly integrate related acquisitions. According to InfoTrends, Shutterfly accounts for around 50% to 52% of the present market.
The increasing use of digital cameras, largely driven by price decreases, has led to heightened demand for online photo printing services, which leaves ample scope for Shutterfly’s expansion. The company also remains committed towards launching services like one-to-one greeting card service, thus beefing up its mobile-related offerings.
Shutterfly is scheduled to report its first quarter 2013 earnings early next month. This company currently carries a Zacks Rank #1 (Strong Buy) and a positive earnings ESP (Read: Zacks Earnings ESP: A Better Method) of +4.88%. This indicates a likely positive earnings surprise.
Other Stocks to Consider
Stocks that are performing well and are worth considering in the Internet-based business services sector include Angie's List Inc. (ANGI), Giant Interactive Group Inc. and Perion Network Ltd (PERI). All three stocks carry a Zacks Rank #2 (Buy).