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September 28, 2006

ShutterFly, Inc. IPO Prices Tonight

posted by MR WAVETHEORY at 9/28/2006 02:19:00 PM
ShutterFly, Inc. (Nasdaq SFLY) is pricing its IPO tonight. The company is a provider of online photo services. It sells prints online. I blogged about the ShutterFly IPO a few weeks ago and here is the ShutterFly IPO analysis. There are several key points about this deal:

Large Market Opportunity
- The company has sold 370 million prints online since inception in 1999 and ShutterFly's market will grow from $424 million in 2005 to $1.9 billion in 2009 implying a very fast growth rate of 45% annually.
Slowing Growth -
ShutterFly grew revenues from $31 million to $54 million to $84 million in 2003, 2004, and 2005 or roughly 74% between 2003 and 2004, and 55% between 2004 and 2005. Profits grew from $2.1 million to $3.9 million to $4.4 million in 2005 or 85% and 12% sequentially - indicating profits haven't been growing as fast as revenues. This implies declining margins.
Pricing Pressure - Its biggest competitor cut prices by 50% recently bringing down the price of a 4x6 print from $.29 to $.12. ShutterFly has followed with price cuts.

The expected pricing range is $13-15 per share. ShutterFly will have 23.6 million shares outstanding after the offering. At a price of $13-15 per share, the market cap will be $306 to $354 million or roughly 3.6x to 4.2x sales in 2005. The company is offering 5.8 million shares. Here's a profile of the company.

Shutterfly, Inc., formerly Shutterfly.com, Inc., is an Internet-based social expression and personal publishing service that enables consumers to share, print and preserve their memories by leveraging its technology-based platform and manufacturing processes. The Company offers a range of products to customers, including prints, photo-based products and merchandise and an assortment of ancillary products, such as frames, photo albums and scrapbooking accessories. In addition, it provides a number of valuable tools and services, such as the ability to upload and edit photos online, share photos with friends and family and permanently store an unlimited number of photos on the Company's system.

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