10 Worst Communication Services Stocks to Buy According to Short Sellers

3) Shutterstock, Inc. (NYSE:SSTK)

Short % of Float (15 August 2024): 21.04%

Number of Hedge Fund Holders: 19

Shutterstock, Inc. (NYSE:SSTK) is a U.S.-based company, which is engaged in providing digital content.

Short sellers are bearish on the company’s shares as they believe that Shutterstock, Inc. (NYSE:SSTK)’s content business continues to struggle. The revenues from this business accounted for ~77% of its total revenue in 2Q 2024, raising concerns about its revenue growth outlook. Moreover, the business continues to face challenges in new customer acquisition. In 2Q 2024, revenue from its content product offering saw a decline of $17.0 million, or 9%, as compared to 2Q 2023 to $170.0 million.

Moreover, short sellers believe that the potential negative impact of the rise of artificial intelligence on Shutterstock, Inc. (NYSE:SSTK)’s business model is expected to be huge. As a result, the shares of the company saw a fall of over ~13% over the past year. Due to AI technology, there can be chances that its content becomes no longer useful, which can create further pressure on its business.

Wall Street analysts believe that the shares of Shutterstock, Inc. (NYSE:SSTK) should be able to steer through the challenging environment over the long term. These analysts believe that its acquisition of Envato Pty Ltd., which is a leader in digital creative assets and templates, should add to its growth opportunities. The acquisition expands Shutterstock, Inc. (NYSE:SSTK)’s reach in faster-growing audiences like freelancers, hobbyists, small businesses, and agencies.

The acquisition is expected to increase the company’s Content revenue from video, audio, graphics, fonts, and templates. This acquisition should add $75 million to its 2024 revenues. Moreover, the company announced the release of GenAI 3D capabilities and its partnership with Databricks. Shutterstock, Inc. (NYSE:SSTK) continues to work on simplifying its product offerings and making pricing more competitive, which might help the company recover its Content business in 2H 2024.

Analysts at Morgan Stanley upped their price objective on shares of Shutterstock, Inc. (NYSE:SSTK) from $55.00 to $58.00, giving it an “Equal-weight” rating on 23^rd July. As per Insider Monkey’s 2Q 2024 database, Shutterstock, Inc. (NYSE:SSTK) was in the portfolios of 19 hedge funds.