Top picks 2013: Shutterfly
This online photo company could be the picture of profits in the year ahead.
Online photo printing website operator Shutterfly (SFLY) is our top aggressive pick for 2013.
The company's biggest advantage over competitors is that it has invested in its business and is the only major online photo company that prints in-house, which gives it a significant margin advantage over competitors that outsource their printing needs.
Meanwhile, more volume for its subsidiary Tiny Prints, which was acquired in April 2011, should shift in-house this holiday season compared to last year when only about a third of volumes were printed in-house. This should lead to some nice margin expansion, which currently is not in the company's guidance.
Promotional activity in the online photo space remains heightened, but appears to have moderated compared to last year.
We also continue to think that rival Snapfish's tactics make little sense long term for the struggling Hewlett-Packard (HPQ), and that eventually the company will sell the non-core asset at some point in the future.
Meanwhile, American Greetings (AM) shutting down its free photo-storage site Webshots and replacing it with a subscription one has likely alienated a lot of customers.
Outside of this, we think Shutterfly has the best offerings in the fast-growing online photo space, and that the company should continue to benefit from increased scale, possible international expansion, lower manufacturing costs, and new higher-margin products, like iPhone cases.
We also like some of its recent technology-based acquisitions, and think mobile represents a solid opportunity for the firm.
Shutterfly currently trades at about 12 times the 2014 consensus for free cash flow per share of $2.45, or 11 times excluding its net cash of $2.49. That's inexpensive for a fast-growing company that is riding a solid secular trend.
More from TheStocksAdvisors.com
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Here's a list of ways to profit from the potential move from defensive to cyclical stocks.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.