Please ensure Javascript is enabled for purposes of website accessibility

Why Shutterstock, Inc. Fell 20% in November

By Anders Bylund - Dec 7, 2016 at 8:00AM

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 third quarter was a tough period for this digital-imagery specialist, and the next quarter isn't shaping up to be much brighter.

Image source: Getty Images.

What happened

Shutterstock (SSTK 1.53%) shares fell 20.2% in November 2016, according to data from S&P Global Market Intelligence. A mixed earnings report with soft guidance goals dragged the stock down, erasing a full quarter's worth of share-price gains.

So what

In the third quarter, Shutterstock beat Wall Street's earnings targets but fell short of analysts' revenue estimates. The provider of digital image services for both consumers and businesses delivered 40% year-over-year earnings growth on a 15% sales boost, but paid download sales increased by just 8%.

Looking ahead, management expects fourth-quarter sales of roughly $407 million and adjusted operating profit growth in the 15% range. These targets have stayed in place for the last three quarters, which is not encouraging for a company in the high-growth investment category.

SSTK Chart

SSTK data by YCharts.

Now what

Shutterstock's trailing sales have doubled over the last three years, but the growth rate is slowing down drastically. In the fall of 2014, trailing revenues were growing at a 40% annual clip; today, the pace has slipped all the way down to 15%.

Share prices don't follow the revenue trend with robotic precision, but sales-growth results do tend to set the tone for Shutterstock's stock chart. Setting a low bar for the important holiday quarter will not inspire investors.

The post-election surge in the U.S. dollar's value against other world currencies is another headwind for Shutterstock, which collects some 66% of its revenues from international markets. If I were a Shutterstock investor, I would not hold my breath waiting for a quick rebound.

Anders Bylund has no position in any stocks mentioned. The Motley Fool recommends Shutterstock. Try any of our Foolish newsletter services free for 30 days.

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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Shutterstock, Inc. Stock Quote
Shutterstock, Inc.
$62.30 (1.53%) $0.94

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

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