Please ensure Javascript is enabled for purposes of website accessibility

Why Shutterfly, Inc. Stock Fell 11.1% in September

By Steve Symington – Updated Oct 11, 2016 at 12:44PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The online photo specialist plunged as a big-name competitor entered its niche.


What happened

Shares of Shutterfly Inc. (SFLY) fell 11.1% in September, according to data from S&P Global Market Intelligence, after (AMZN 1.26%) quietly launched a competing photo printing service. 

So what

More specifically on Sept. 21, Jeff Bezos' brainchild launched Amazon Prints, describing it as a "new photo printing destination for Prime Photos and Amazon Drive customers."

Of course, Amazon already provides unlimited photo storage as a perk to its millions of Amazon Prime members. So it's a logical step for the online retail behemoth to also provide a compelling photo printing service. And Amazon Prints, for its part, offers 4-by-6 prints starting at just $0.09, 8-by-11 hard cover photo books for $19.99, and a variety of other products including invitations and cards, as well as wall calendars "coming soon."

Naturally, Shutterfly shares promptly plunged nearly 13% on the news, marking its biggest single-day drop in over eight years. 

Now what

Several analysts stepped out to defend Shutterfly in the wake of Amazon's launch. Robert W. Baird's Colin Sebastian and Ben Gaither, for example, argued the market was overreacting, stating, "Most Prime customers go to Amazon for the convenient and expedient shopping experience, whereas photobook curation tends to be a more time-consuming, customized transaction."

That's fair enough. And it wouldn't be the first time Amazon failed to disrupt an industry. Recall that Amazon similarly tried to shake up the credit card reader business with the launch of Amazon Local Register in 2014, only to kill the service earlier this year, after it failed to gain traction despite attractive fees and pricing that undercut competitors.

Nonetheless, I think most Shutterfly investors would agree that their company would be wise not to underestimate the influence Amazon Prints could have, especially given its captive audience with millions of Prime Photo users. So while Amazon's entrance into Shutterfly's niche hardly means doom for the smaller company, it was no surprise to see shares fall so hard last month.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.