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  • Is The Pressure Too Much For CafePress? 0 comments
    Jan 20, 2014 9:35 AM | about stocks: PRSS, AMZN, GKNT, EBAY

    CafePress (NASDAQ: PRSS) is an e-commerce company, which enables customers to create, buy, and sell various customized and personalized products worldwide. I like to think of its line of business to be more like that of Geeknet (NASDAQ:GKNT). However, industry giants, eBay (NASDAQ:EBAY) and Amazon.com (NASDAQ: AMZN) are more fearsome competitors. CafePress operates a portfolio of branded websites, including CafePress.com, CanvasOnDemand.com, Imagekind.com, and GreatBigCanvas.com.

    The company has a market cap of $104 million and generates annual revenue of more than $240 million, which is more than double its market value and more than triples its enterprise value. The company enables users to purchase a range of merchandise, customize products using online design tools, create and manage shops, and access design, sales, and support staff. It is quite a unique business, but still falls under the same category as that of Amazon and eBay, which means the pressure to succeed is not to be waived away.

    The e-commerce industry has seen larger companies like Groupon (NASDAQ: GRPN) struggle to keep up with Amazon and eBay. The worst part is that retail giants like Wal-Mart (NYSE: WMT), Target (NYSE:TGT), J.C. Penney (NYSE: JCP), and Best Buy (NYSE: BBY) are also eyeing the same market as they embrace the shift from traditional shopping to online shopping. Additionally, there are few barriers to entry into the e-commerce business as more startups continue to crop up in the allure of the rapid growth in the industry. Therefore, it appears as though the pressure on CafePress to succeed is not ordinary as it comes from all directions, including potential startups.

    In the company's most recent quarter results revenues grew by 15.8 percent, but it remains unprofitable for the annualized results from the last four quarters. The company's operating loss margin of 3 percent compared to the industry average of 0 percent indicates that it is not far off from its competitors, which is a good thing. However, the price to book value of 1.19 for a company facing competition from so many quarters means that it would take some performance to boost its valuation.

    CafePress has been undergoing an integration process, which has hurt its margins thereby putting pressure on cash flows. However, reports indicate that much of that process is now complete, which means it may be only a few quarters before it breaks even. This means that investors will be looking for some improvement from the company since it will now not have excuses for poor performance

    The bottom line is, CafePress operates in one of the most competitive industries. It has been under much pressure over the last few quarters as its stock price fluctuated between $5.50 and $7.50 per share. However, with some problems set to go away, expectations will be higher, which puts it under even more pressure to deliver in a market where only the best survive.

    Stocks: PRSS, AMZN, GKNT, EBAY
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