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Shutterfly (SFLY) Down 6.5% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Shutterfly, Inc. (SFLY - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Shutterfly Q2 Loss Narrower than Expected, Sales Miss

Shutterfly posted mixed second-quarter 2017 results wherein the loss reported by the company was narrower-than-expected but revenues missed estimates.

Quarter in Detail

Generally, this personalized products and service provider’s business is highly seasonal and incurs losses in the first three quarters of the year.

Shutterfly posted a loss of $0.44 per share in the second quarter, narrower than the Zacks Consensus Estimate of a loss of $0.56 and the company’s projected loss range of $0.55 to $0.50. The reported figure was also slightly narrower than the prior-year quarter loss of $0.48 per share.

The improvement came on the back of a higher top line and expense control.

Net revenue increased 2% year over year to $209.0 million and was within the guided range of $205.0 million to $212.0 million. In fact, the second-quarter earnings season marked the 66th consecutive quarter of year-over-year net revenue growth. However, revenues lagged the Zacks Consensus Estimate of $210.3 million by 0.6%.

Revenues of the company benefited from the strong performance of the company’s flagship Shutterfly brand, which was driven by the home décor and personalized gift categories, supported by the company’s strategy of expanding range of products. Revenues were also bolstered by the growth seen in Shutterfly Business Solutions (SBS) segment, but were partially offset by weaker performances at the non-Shutterfly.

Revenues from the Consumers category were up 1% year over year to $179.1 million, backed by mid single-digits growth at the Shutterfly flagship brand. Meanwhile, SBS segment revenues jumped 10% to $29.9 million.

Both total number of unique customers and total orders grew 3% year over year to 3.4 million and 5.5 million, respectively. However, average order value was $32.75, down 2% from the year-ago quarter, primarily due to a higher level of promotions and a greater mobile mix.

Gross margin (excluding restructuring charges) decreased 280 basis points (bps) to 43.5%.

Normalized operating expenses totaled $109.9 million (excluding restructuring charges of about $4.5 million), decreasing 4.8% year over year. This was because rise in general and administrative expenses were partially offset by a decline in technology and development costs as well as sales and marketing expenses.

Adjusted EBITDA (Earnings before interest, tax, depreciation and amortization) was $17.4 million, down 4.7% year over year. This reported figure was at the high end of the guided range of $14.0 million to $17.5 million, on the back of careful expense control.

3Q17 Earnings Outlook

For the third quarter of 2017, the company expects to incur loss per share in the range of $0.80 to $0.76. The Zacks Consensus Estimate of a loss of $0.82 per share is wider than the guided range.

Net revenue is expected in the range of $187.0 million to $193.0 million, a year-over-year growth in the band of -0.2% to 5.3%.

Gross profit margin is expected within 35.0% to 35.5% of net revenue. Adjusted EBITDA is expected in the range of $0.0 million to $3.0 million.

2017 Guidance

The company reaffirmed its previously issued guidance for 2017.

The company continues to expect earnings of $0.45 to $0.80 per share in 2017. The Zacks Consensus Estimate of $0.58 per share falls within the guided range.

Net revenue is still expected in the range of $1.135 billion to $1.165 billion, a year-over-year increase of 0.4% to 3.1%. Adjusted EBITDA is anticipated to be in the band of $210.0 to $230.0 million, as expected earlier.

Gross profit margin is projected in the range of 49.0% to 50.0% of net revenue, in-line with the previous expectation.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Shutterfly, Inc. Price and Consensus

 

VGM Scores

At this time, the stock has a strong Growth Score of A, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is equally suitable for value and growth investors while momentum investors may want to look elsewhere.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.




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