Shutterfly (SFLY): A Death Rattle From Web 2.0

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Shutterfly (SFLY) calls itself an Internet-based social expression and personal publishing service. In reality, it is a simple online photo storage, swapping, and printing service.

No matter what it is, the company is not doing very well. Its shares fell over 17% today after it announced Q1 earnings. The stock fell through its 52-week low and traded down to $12.65. The stock has been as high as $37 during the period.

Shutterfly is not growing like a Web 2.0 company. Revenue rose 29% to $34,3 million. The company forecast Q2 revenue to be up 17% to 27% to a revenue range of $35 to $38 million. In other words, no growth quarter-over-previous-quarter.

Shutterfly also displayed the uncanny ability to lose more money that it did last year. The company’s net loss went to $3.6 million from $1.1 million in the quarter a year ago.

A look at the company’s P&L shows another source of the trouble. Shutterfly is spending way too much money. Expenses rose from $17 million in Q1 last year to $28.4 million in the last quarter.

If the company is not going to grow very fast, at least it could control expenditures.

Douglas A. McIntyre