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The Sky’s The Limit For Shutterfly

Posted on Wednesday, Jul 6th 2011

The U.S. printed greeting card market is expected to be worth $12 billion, of which a mere 5% is estimated to be transacted via the Web. The country’s stationery market is estimated to be worth $7 billion to $7.5 billion with 2% of the market’s transactions being conducted over the Web. These low Internet penetration rates are big opportunities for online photo sharing and printing site, Shutterfly.

Shutterfly’s Financials
Shutterfly’s (NASDAQ:SFLY) Q1 revenues grew 25% over the year to $57.2 million. The Street was looking for revenues of $53.5 million. Loss of $0.27 per share grew over previous year’s loss of $0.18 per share and was also higher than the market’s projected loss of $0.26 per share.

During the quarter, revenues from personalized products & services grew 34% over the year to $40.8 million. Revenues from prints grew 3% over the year to $14.1 million with commercial prints revenues of $2.3 million.

The company’s total transacting customers grew 25% over the year to 1.3 million. Total orders grew 23% over the year to 2.1 million, and the average order value grew 1% over the year to $26.64.

For the current quarter, the company projects revenues of $68 million–$72 million with a net loss of $0.35–$0.46 per share. The Street was looking for revenues of $57.6 million in the quarter with a loss of $0.22 per share. For the year, they expect to report revenues of $468 million–$478 million and EPS of $0.39–$0.44. The Street was projecting the year’s revenues of $395.5 million with EPS of $0.78.

Shutterfly Strengthens Social Marketing
During the quarter, Shutterfly continued to expand their social network offerings and launched Facebook share that allows customers to post Shutterfly product images and details on their Facebook news feeds so that users and their friends can endorse and spread the word about their products.

Shutterfly’s Acquisitions in Stationery Space
To expand in the high potential market of online stationery products, Shutterfly acquired Tiny Prints, a private Internet-based provider of cards, invitations, personalized stationery, and photo books. The acquisition of the Sunnyvale-based organization is said to have cost Shutterfly $369 million.  Besides its flagship, Tiny Prints also owns which is a website focused on wedding cards, invitations, and related stationery. Last year, Tiny Prints reported revenues growing 53% over the year to $87 million. Shutterfly hopes to expand in the printed cards market through the acquisition.

This is the biggest acquisition made by the company since it went public in 2006, and the market has reacted positively to the acquisition. The stock is trading at $59.02, taking the market capitalization to $2.0 billion. It touched a 52-week high of $66.70 in April of this year.

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