Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Shutterfly (SFLY) fell by as much as 14% early Friday, then partially recovered to trade down around 6% as of 2 p.m. after the company announced better-than-expected fourth-quarter results, but followed with disappointing guidance.
So what: Quarterly revenue climbed 18% year over year to $483.3 million, which translated to adjusted net income that more than doubled to $2.57 per diluted share. Analysts, on average, were looking for earnings of $2.50 per share on revenue of $477 million.
Unfortunately, for the current quarter Shutterfly anticipates revenue to increase 11.6% to 14.5%, to a range of $153 million to $157 million, which will result in an adjusted net loss per share of $1.36 to $1.20. Wall Street was modeling a much narrower loss of $0.88 per share on higher sales of $159.5 million
In addition, for the full year 2015 Shutterfly sees revenue of $1.04 billion to $1.06 billion, or a year-over-year increase of 12.8% to 15%, and adjusted net earnings per share in the range of a $0.12 loss to net income of $0.04. Analysts were expecting 2015 earnings of $0.28 per share on sales of $1.05 billion.
Now what: To Shutterfly's credit, CEO Jeffrey Housenbold noted those results anticipate a "series of strategic initiatives to drive increased scale efficiencies and operating margins from the consolidation of several of our technology platforms, the closure of our sub-scale Elmsford manufacturing facility, and the shutdown of our Treat brand."
After those initiatives are implemented, Shutterfly should emerge a more efficient business poised to capitalize on and gain share in its core markets. For now, however, I prefer to remain on the sidelines to observe how its efforts progress over the next few quarters.
