An Analysis Of Online Printer CafePress' Upcoming IPO

| About: CafePress (PRSS)

Investors will have the chance on Thursday to buy stock in one of the leaders in the special print industry, as CafePress Inc. (NASDAQ: CPRS is planning an initial public offering to raise $77 million.

The San Mateo, California-based company last week filed its registration papers with the Securities and Exchange Commission noting that it will sell 4.5 million shares at a price of $16 to $18. The company will sell 2.5 million shares, while stockholders will sell two million shares. The shareholder's amount is roughly 44% of the deal. The managers are JPMorgan and Jefferies.

This is the second time the company has taken steps toward an IPO. Last June, it filed papers with the SEC to raise a similar amount of cash, but nothing came of it. My hunch is that the company decided to delay the offering due to the poor state of the economy and its effect on the stock market at the time. Now that the stock market is rallying, more companies are choosing to proceed with their IPOs.

Founded in 1999, CafePress specializes in screen and garment printing. The company has tapped into a market that is expected to grow to $8.1 billion in 2014. In the U.S., commercial printing revenue will rise 2.1% each year through 2014. The entire commercial printing industry in the U.S. is estimated to be $70 billion.

CafePress has managed to grow its business in the industry with an interesting business model. Customers can register to become members so they can create their own designs and sell them on CafePress' website through what the company calls shops. Products sold with these custom designs include everything from T-shirts to coffee mugs.

As of December 31, 2011, the company boasted having 15 million members and shipments that totaled more than 7.8 million. That contributed to its revenues growing to $175 million in 2011 from roughly $97 million in 2007. Its operating expenses grew to $70 million in 2011 from $31 million in 2007.

Among CafePress' competition are e-commerce companies like Amazon (NASDAQ:AMZN) and eBay (NASDAQ:EBAY). Vistaprint (VPRT) and Shutterfly (NASDAQ:SFLY), which also allow customers to customize their own products.

CafePress is known as a pioneer of on-demand printing online. However, it is facing increased competition from other companies. They include Printfection, Spreadshirt and Zazzle. Factors I found that CafePress must address are its pricing structure and its limited offerings of certain products. As more companies come on line bringing similar products, they can lure away CafePress' customers.

Given that it has been able to consistently grow its business, CafePress stands to be a formidable leader in the area of online printing.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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