| | Shutterfly Shares Move Higher As Analysts Applaud Product Mix, Customer Loyalty
NEW YORK (AP) -- Shares of online photo service, climbed Wednesday after two analysts initiated coverage, praising the company's product mix and loyal customer base.
The Redwood City, Calif.-based company's stock soared $1.07, or 8.8 percent, to $13.17 in afternoon trading on the Nasdaq. Shares traded as high as $16.73 on Sept. 29, the day of the company's initial public offering, and as low as $12.05 since.
After the market close Tuesday, the printing and photo sharing Web site posted a wider third-quarter loss on a 36 percent growth in revenue, in its first report as a public company. Notably, the company said 77 percent of its sales were generated by existing customers, and that the percentage of revenue from products other than photo prints was on the rise year-over-year.
Jefferies analyst Youssef Squali initiated coverage of Shutterfly with a "Buy" rating and a $16 price target.
"Shutterfly's focus on building a premium brand allows premium pricing and has given it a loyal customer base with very favorable demographics -- 84 percent female, of which the majority is 25-44 years old with children and average household income of over $75,000," wrote Squali in a note to investors. "Shutterfly has the lowest revenue contribution from 4x6 prints and the highest average order size in the industry as a result of early introduction of high-value photo-based products and merchandise."
Squali noted the company's average order size has increased, even as 4x6 print prices have dropped.
JP Morgan analyst Imran Kahn also started coverage Wednesday, rating the stock "Overweight."
Kahn wrote in a note to investors that the company stands to benefit from rising digital camera penetration -- an estimated 81 percent in the U.S. by 2010.
He also lauded the company's emphasis on products other than standard photo prints, such as greeting cards and photo books, and its use of e-mail to share photos and draw in new users.
"In addition, we believe certain aspects of Shutterfly's user interface, such as unlimited storage and its new downloadable editing tool, Shutterfly Studio, increase customer stickiness," Kahn wrote.
While much of the business to date is seasonal, Kahn also noted that Shutterfly's interest in entering markets such as yearbook printing could help it bring in revenue in the non-holiday quarters. |
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