Is it bad form to quote myself? When I wrote about SFLY a couple of days ago I said “I wouldn’t be too surprised to see SFLY below 15 by the end of the week.” It opened at 13.37 today, two days after my prediction. Instead of selling calls, I should have bought puts, but then again that’s not my trading model.
I listened to about 30 minutes of the earnings call yesterday afternoon while I was on my way home from work. I thought the numbers would be bad which is why I sold SFLY naked calls twice before the announcement and it looks like I’ll be rewarded for my risk taking. As much as I like to base my trade decisions on the charts (and the chart was right again for SFLY), I also like to listen to conference calls for earnings announcements. I advise listening whenever you have the chance. I only catch a couple per season, but am almost always happy I did. They are free to call into and you can gain more information than just what’s in the numbers.
What doesn’t show in the summary below from Yahoo! Finance, InPlay is the tone of the analysts covering SFLY. Here’s the summary:
4:11PM Shutterfly reports EPS in-line, misses on revs; guides Q2 EPS below consensus, revs below consensus; guides FY08 EPS in-line, revs below consensus (SFLY) 16.35 -1.48 : Reports Q1 (Mar) loss of $0.15 per share, in-line with the First Call consensus of ($0.15); revenues rose 28.5% year/year to $34.3 mln vs the $35.6 mln consensus. Co issues downside guidance for Q2, sees EPS of $(0.19)-(0.24) vs. ($0.15) consensus; sees Q2 revs of $35-38 mln vs. $39.75 mln consensus. Co issues mixed guidance for FY08, sees EPS of $0.30-0.50 vs. $0.44 consensus; sees FY08 revs of $225-245 mln vs. $252.03 mln consensus. For FY08 a non-GAAP basis, gross profit margins are expected to range from 53% to 55% of net revenues.
I thought I heard a lot of frustration in their voices from the officers not answering the questions the way the analysts thought they should be answered. Obviously I’m biased, but I liked the group mentality of questioning how SFLY would turn this slowing revenue trend when it has so many competitors that are selling similar items cheaper. They went with the standard technology improvements for some of their answers, but that didn’t seem like enough to me. In addition, they hung their hats on their increase in user registrations. To me, that is not a direct translation into greater earnings or revenue. They might have said it and I missed it, but I didn’t hear them mention how many return customers they have. Retention should be a key element for growth I’d think. That number must be down if new customers were up and revenue was still down. It’s like they were saying, “Hey, look over here, this thing is shiny and cool. Don’t bother looking at that old thing in front of you.”
Also, I heard them mention that they have no immediate plans to cut prices. I translate that to mean they do plan to cut prices, but will wait until they lose more market share. I’m keeping my bearish stance on SFLY.
So far, so good! Are you going to put the dagger in (close position) or try to squeeze the last quarter out of it? I don’t like buying back but wouldn’t want it to get off the mat either — June 20 is a ways away.
I have a limit in to buy it back at .05, but might change that to .10 to see if I can get it to hit. I’d hate to have something odd happen and take a loss, but it could be an easy $60 (6 x.10 x 100) if I wait.
this post is very revealing of benefits to listening to conference calls/co. reports, thanks.