Tài liệu Nothing But Net 2009 Internet Investment Guide 26 docx

251

Global Equity Research

05 January 2009

Imran Khan

(1-212) 622-6693

[email protected]

(b) even the public companies were still in their early-growth (and, for some, rapid

growth) stage during the last economic downturn.

As such, given our projection for eBay of a ~54% F’09 - F’14 EBIT CAGR, and our

view of the beginning of a possible economic turnaround in 2H’09, we believe the

stock can achieve a 54x EV/EBIT multiple to our F’09 EBIT estimate (reflecting

better forward visibility than the current valuation of 22x our F’09 estimate) and thus

arrive at our December 2009 price target of $12.

The parameters of our EV/EBIT multiple analysis are in the table below:

Table 170: Key Valuation Assumptions

5 yr forward EBIT CAGR 54%

1x EBIT Growth 54

2009 EBIT $4

Implied Enterprise Value $201

+ Cash $88

- Debt $-

Market Value $289

Share count 25

2009 Price Target $12

Source: Company reports and J.P. Morgan estimates.

Our EV/EBIT valuation is based on the following projections for revenue and

operating income growth

Table 171: Growth Profile

$ in millions

2009E 2010E 2011E 2012E 2013E 2014E

Revenues 224.4 266.1 309.8 354.6 398.7 440.4

Y/Y change 18.6% 16% 14% 12% 10%

Less: Operating Expenses 220.6 256.2 295.9 335.4 373.6 408.3

As % of total revenues 98.3% 96.3% 95.5% 94.6% 93.7% 92.7%

Operating Income (Loss) 3.7 9.8 13.9 19.1 25.1 32.1

Operating margin 1.7% 3.7% 4.5% 5.4% 6.3% 7.3%

Source: J.P. Morgan estimates.

Valuation and Rating Analysis

Shutterfly trades at a discount to its peers. On an EV/EBITDA basis, SFLY trades at

2.6x our F’09 EBITDA estimate of $49.3M vs. its peer group at 6.5x. Given SFLY’s

strong growth prospects, we believe there is opportunity for multiple expansion and

thus rate the stock Overweight.

Risks to Our Rating

We believe there are three primary risks to our Overweight rating on Shutterfly:

• Seasonality: Currently, Shutterfly’s business is very seasonal, with

approximately 50% of revenues earned in the fourth quarter. If the company

were unable to deliver customer orders during the holiday season, there

would be downside risk to our rating.

• Product pricing: Pricing on 4X6 prints has come down over the last few

years, causing the company to look for growth in other product segments.