As people have fewer children due to a lack of confidence in the direction of the economy, growth potential for Shutterfly will slow.
Shutterfly vs. Other Hot Mid-caps
Shutterfly, Inc. (NASDAQ:SFLY) is currently trading at 106 times earnings. Therefore, there is very little margin for error. The good news for momentum traders is that Shutterfly has a knack for beating expectations, which drives the stock higher. Full-year guidance has also been upped to $766-$771 million from $739.7-$746 million. Near-term trends are still strong.
Zynga Inc (NASDAQ:ZNGA) is another mid-cap stock drawing a lot of attention. Check out my article written on June 30, 2013: Zynga’s Flaws, Threats, and Potential. The following is the final line in that article: “Perhaps a new leader with direction and an innovative spirit would serve the company well.” The next day, Don Mattrick — former leader of Microsoft’s entertainment division — took over. Mattrick has a superb track record, and this news sent Zynga’s stock flying.
Zynga has dealt with two years of losses, and three of the last four quarters have been in the red. Zynga has also demonstrated poor efficiency, sporting a profit margin of -9.80%. Investors like to look at the direction of a company, and with Mattrick at the helm, the company’s direction should improve. Even if he can’t get the company to profitability and quality efficiency levels right away, he will likely lead the company toward substantial improvements. With new leadership and real-money gaming on the horizon, Zynga’s outlook has suddenly brightened.
Groupon Inc (NASDAQ:GRPN) is another company that has delivered fruitful returns for investors since new management took over. Groupon Inc (NASDAQ:GRPN) has suffered from four consecutive years of losses, but those losses have narrowed over the past two years. Other positives include continuous revenue improvement, improved performance in mobile, and stronger customer retention. However, Groupon is trading at 31 times forward earnings, but the barrier to entry is lower than a tree stump. In other words, this business model is easy to replicate. If Groupon Inc (NASDAQ:GRPN) succeeds, there is little doubt that other entrepreneurs will desire a piece of the pie, which will then lead to fierce competition.
Luckily for Shutterfly, management is already strong and the brand is well established, which would make it difficult for a competitor to come in and steal market share. However, Shutterfly does have to worry about the increased photo sharing through social media.
Conclusion
Shutterfly, Inc. (NASDAQ:SFLY) is a well-managed company making all the correct moves. Its aggressive acquisitions will lead to increased top-line growth, and the stock should continue to perform well in the near future. Unfortunately, population growth trends will likely lead to slowing growth over the long haul.
Dan Moskowitz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article This Stock Should Continue to Fly originally appeared on Fool.com.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
