Shutterfly: Q2 Earnings Likely to Disappoint

Jul.30.08 | About: Shutterfly, Inc. (SFLY)

Shutterfly (NASDAQ:SFLY) is scheduled to report Q208 results after the market closes on July 30. Based on our analysis, we at eChristianInvesting are expecting SFLY to report disappointing results that fail to meet Wall Street's consensus expectations.

Analyst Expectations

We are forecasting revenues of $35.6M versus analyst consensus of $36.2M. This would represent a 19% increase in revenues from last year's $29.9M in the same period. With consumers looking to tighten their budgets this year, we believe that discretionary products such as those offered by Shutterfly have suffered as a result. While traffic appears to have remained strong, it is our belief that visitors are coming to look rather than to buy. This is further reinforced by the increased promotional offers that the company has touted in recent weeks.

Share Performance

To date, Shutterfly's shares have dropped almost 60%. Meanwhile, the NASDAQ has only fallen 16%. Unfortunately for Shutterfly's investors, their shares have been one of the worst performers of 2008 after yielding a phenomenal 78% return in 2007.


Shares are now trading at 34x consensus 2009 EPS estimates. Despite the large drop in price, SFLY's shares still trade at a healthy premium to their peer group. This premium valuation combined with the potential for disappointing quarterly results and the continued bleak outlook for the economy should continue to weigh these shares down for the remainder of the year.

Stock position: None.