Shutterfly Shares Gain as Competition Worries Fade

Monday, 21 May 2012 03:45 PM

 

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Shares of Shutterfly Inc. on Monday rose the most in three weeks on speculation that the company, which offers photo-related products online, will face less competition from rivals such as Facebook Inc. as the rivals focus on mobile advertising.

Shutterfly, based in Redwood City, California, advanced $1.71, or 7.2 percent, to $25.46 at 3:20 p.m. New York time. The stock, which rebounded from its lowest price since February, had risen 4.3 percent this year before Monday.

“The correlation between Facebook and Shutterfly was a negative one because people were concerned about Facebook entering Shutterfly’s market, but now that doesn’t seem very realistic to me,” Mitchell Bartlett, an analyst at Craig-Hallum Capital Group LLC in Minneapolis, said in a telephone interview.

“Shutterfly is coming off previous lows and bouncing, and I am still very interested,” he said. Bartlett has a buy rating on Shutterfly, with a target price of $42 a share.

Shutterfly is focused on completing its $23.8 million April purchase of Eastman Kodak Co.’s online-photo business. The deal, which will transfer the accounts of 75 million Kodak Gallery users to Shutterfly, is scheduled to be complete July 2.

Kodak, the Rochester, New York-based photography company, filed for bankruptcy protection in January.

Kodak Gallery users have until May 28 to choose whether to move to Shutterfly or opt out. The services allow users to upload photos, organize galleries, and share photos for free, while charging users to order prints, DVDs, photobooks and other products.

Shutterfly Rivals

Demand for such services has declined as people share photos online through Facebook and other social networks. While Shutterfly eliminates a competitor with the Kodak acquisition, it still faces smaller rivals such as Snapfish, American Greetings Corp. and Vistaprint NV.

Facebook, the social networking site that raised $16 billion in an initial public offering Friday, is seeking to draw more marketers to boost sales. The company, the biggest provider of online display ads in the U.S., wants to attract more users to its site through mobile phones instead of the Web.

Apple Inc. is also said to be expanding its iCloud services to include more photo sharing features, “which could be a negative” for Shutterfly, Bartlett said. ‘The focus is also on e-commerce and advertising.”

Shutterfly is well-placed to face its competitors after it “had a very strong first quarter,” Bartlett said. Also, “the guidance has been conservatively set for the year.”

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