I can't believe the kiddie-pool depth to which some bears will sink when it comes to attacking Shutterfly (NASDAQ:SFLY). Herb Greenberg sank his teeth into the company over the weekend, when he argued in a Wall Street Journal column that Shutterfly's shipping operation is an airbrushed profit center.

More to the point, he argues that the shipping and handling fees that Shutterfly customers pay accounted for 20% of last year's top line -- and 19% in 2005. He compares that showing with the 5.3% at Amazon.com. (NASDAQ:AMZN).

His contention is flawed on various levels.

Let's start with the average order size. Amazon doesn't break that down, but you have to assume that shipping on a $300 iPod will always be smaller proportionally than paying $7 to order a $30 bound photo book from Shutterfly. I mean, come on. The average Shutterfly order this past quarter was $20.44, though that figure beefs up in the hyper-profitable fourth quarter, when orders for photographic greeting cards, calendars, and personalized gifts start pouring in.

Price check, reality check
Check that price check on the iPod at Amazon, though. It actually ships for free through "Super Saver Shipping" at Amazon, a promotion that the website offers for many of its media and light non-media items valued at $25 or more. Amazon.com shoppers can pay for expedited shipping, join the Amazon Prime club for free two-day shipping, or incur postage costs when third-party items are sold. Still, it's usually a great site if you want to skimp on shipping, as long as you know that it's simply baked in to the selling price.

That's the other flaw in Greenberg's argument. Amazon sells at prices that are competitive with those at bricks-and-mortar chains, but then it seals the deal with subsidized shipping, coupled with the lack of charging sales tax in all but four states.

At Shutterfly, it's the other way around. It discounts its photo-finishing services and will offer pricing promotions on its signature photo-centric products. It then makes some of the discounts back by charging more in shipping and handling than it incurs in fulfillment costs.

It's a zero-sum game -- two ways to skin the same cat. In the end, you're left with two companies that are profitable on an annual basis and have fanatical fan bases. What's wrong with that?

Fly like a Shutterfly
A full 74% of last year's revenues at Shutterfly came from repeat customers. In other words, users have no problem acknowledging the value of the site, shipping fees and all. The company has scored year-over-year revenue growth in each of the past 26 quarters. It's looking for revenues to grow 44% to 46% higher this year, on adjusted EBITDA margins that clock in at a respectable 15% to 17%.

Are there other companies doing what Shutterfly is doing? Of course. They're just doing it poorly. Why else would Sony (NYSE:SNE) have handed over its ImageStation customers last month? Why else did Target (NYSE:TGT) turn to Shutterfly to offer Shutterfly products in May? Yes, that deal also allows for Shutterfly users to pick up their print orders at the local Target, but that's a good thing.

Knowing that the Target deal is likely to reduce Shutterfly's dependence on shipping would certainly make Greenberg giddier than a toddler with a pinwheel in one hand and a stick of cotton candy on the other. Besides, wasn't it just a few years ago that the bears took Amazon to task for its generous shipping policies? They didn't get it then. Greenberg doesn't get it now.

He's not the only one bearish on Shutterfly. It's just a two-star stock, out of a possible five, in the Motley Fool CAPS community-fueled stock-rating site. Even my own buds fail me! A few months ago, my Foolish friend Dan Rubin -- the brainchild behind a lot of what you see on CAPS TV -- asked me for some quick research on Shutterfly. Was he making a bullish pitch? No, he wanted to bash it. And he did!

Sting like a B-movie
It's true that Shutterfly has plenty of competitors, from Kodak (NYSE:EK) to Hewlett-Packard (NYSE:HPQ), but they're plain-vanilla slackers when it comes to matching Shutterfly's personality and breadth of quality goods, such as slick keepsake photo books and personalized storybooks. Yahoo!'s (NASDAQ:YHOO) Flickr is a threat, as the only competitor with some combination of stickiness and a pulse, but it's more of a social photo-sharing site than an e-commerce hub.

Shutterfly has defied the skeptics. It has gone on to double since last year's $15-per-share IPO. It is profitable and growing quickly. It's also still early in the game. If you want to compare Shutterfly to Amazon.com, you have to go back to 1997 to find similar top lines. Yes, Amazon was growing faster then, and it had a much larger market to carve out. At least Shutterfly has been profitable for a couple of years now, way ahead of the Amazonian giant.

I'm still waiting to hear a chin-scratching bear argument for Shutterfly. Go ahead and post one in CAPS if you think you've got it. Until then, I'll contend that Shutterfly's snapshot is worth a thousand glowing words.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.