Shutterstock (SSTK) was under heavy pressure Tuesday (-7.2%) after Morgan Stanley initiated coverage on the stock with an Underweight rating and a price target of $40. The company traded down 6.49% on Tuesday, hitting $52.33. About 6% (2,134,222 shares) of the company’s stock traded hands.
Morgan Stanley analyst Dean Prissman said based on their proprietary AlphaWise study and bottom-up analysis, they believe Adobe's aggressive entry into Shutterstock's market is set to pressure growth.
Prissman notes that Adobe is the primary supplier in the world of software used by creatives. The firm's AlphaWise survey says many Shutterstock users are highly price sensitive and not loyal. Survey results showed that, "55% of Shutterstock users indicated they would shift usage from Shutterstock to Adobe Stock if features were offered in the Adobe Creative Cloud that made importing images easier," according to the analyst.
As I have reported previously
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here Adobe has made importing images somewhat easier and for most customers they have dramatically lowered the prices customers will need to pay for the images they use.
Morgan Stanley said Adobe is seeking to use stock photography as an incentive to drive ARPU (average revenue per user) and upgrade users to the Creative Cloud. Given this it is offering deep pricing discounts (+50% discount versus Shutterstock) and a robust set of integration features that improve workflow for users. "The problem for Shutterstock is that almost all of its current and potential addressable customers use Adobe products as a primary work tool," the analyst said.
Prissman said Shutterstock’s growth relies heavily on user growth and we see Adobe as a roadblock. "Given Shutterstock's sporadic disclosures, the narrative around the stock significantly overemphasizes less important operating metrics, and significantly under emphasizes user growth," he said. "Based on our bottom-up analysis, we see slow user growth as a key driver of a 600 bps and 1200 bps deceleration in revenue growth in FY15 and FY16."
A number of other firms have also recently commented on SSTK. For a summary of analysts ratings
click here. Cantor Firzgerald reiterated a buy rating and set a $100.00 price target on shares of Shutterstock in a research note on Sunday. Analysts at Zacks upgraded shares of Shutterstock from a strong sell rating to a hold rating in a research note on Tuesday, July 7th. Analysts at RBC Capital reiterated an outperform rating and set a $86.00 price target on shares of Shutterstock in a research note on Wednesday, June 17th. Analysts at Topeka Capital Markets initiated coverage on shares of Shutterstock in a research note on Thursday, May 28th. They set a buy rating and a $92.00 price target on the stock. Finally, analysts at Deutsche Bank raised their price target on shares of Shutterstock from $71.00 to $72.00 and gave the company a hold rating in a research note on Friday, May 8th. One investment analyst has rated the stock with a sell rating, two have issued a hold rating and six have assigned a buy rating to the stock. The company has an average rating of Buy and an average price target of $78.81.