Why The Dramatic Decline In Shutterstock Share Price?

Posted on 8/10/2015 by Jim Pickerell | Printable Version | Comments (0)

Is Shutterstock in Serious Trouble? On August 5th the SSTK stock price closed at $50.75. On August 6th the company announced its second quarter results and missed the projected revenue for the quarter by 1.5%. On August 7th the stock closed at $33.65, a 34% decline in 2 days.

NO! The company is not in trouble. Rather, financial analysts that closely watch Shutterstock are finally waking up to the realities of the stock photo business.

A few months ago most of the financial analysts were projecting the potential for the share price to grow to the $70 to $100 range. On November 12, 2014 the share price closed at $83.06 and the total projected value of the company was $2.975 billion. On April 15, 2015, after Shutterstock reported its Q1 2015 results, shares traded at $73.34 valuing the company at $2.3 billion. At last Friday’s close the company that has already grossed $201.9 million this year and is expected to gross $425 to $430 million in all of 2015 was valued at about $1.2 billion.

The real value hasn’t dropped. Now, it is just more realistic than it was in April, or based on the opinions of most analysts, just last week.

On July 14th Morgan Stanley initiated coverage on the stock with an “underweight” rating and a price target of $40. They had surveyed Shutterstock users and concluded that 55% would switch to Adobe Stock if the Creative Cloud made importing images easier. No information was given as to how many users actually responded to this survey.

(I am very suspicious of the 55% number and suspect it is about as accurate as surveys that say Donald Trump will be the next President. Only time will tell how many buyers will really be willing to switch.)

Over the weekend Cantor Fitzgerald lowered its price objective from $100 to $72, Jefferies Group lowered from $90 to $39 and RBC Capital lowered from $86 to $38.

Until recently analysts believed that:

  • Shutterstock annual growth of about 40% per year for the last three years would go on at near that rate forever. Now it looks like it will be in the range of 30% in 2015 and likely to be less in 2016.
  • There are a host of unreached commercial customers who need images and are just waiting to learn about Shutterstock.
  • Shutterstock has no serious competition
Investors failed to recognize:
  • That the potential market for stock imagery is nowhere near the $4 billion Shutterstock projected when the company went public.
  • That the overall market is growing very little in terms of revenue on an annual basis.
  • That the stock had been seriously overpriced based on a false understanding of market size.
  • That growth in subscription downloads is not an accurate measure of actual usage. (Many images downloaded through subscriptions are not used in a final product.)
  • The degree to which Shutterstock’s growth resulted from taking market share from other players, rather than opening up new markets.
  • The potential for Adobe to take market share.
  • How difficult it will be to continue taking market share going forward.
  • The degree to which Shutterstock’s growth was due to strategic errors by its competition, particularly Getty Images.
There are threats to Shutterstock’s long term growth, but it seems more likely that growth will simply slow rather than there being an overall revenue decline as has occurred with Getty Images.
  • The biggest threat is Adobe which will likely take some market share, but the loss is not likely to be sudden and will take some time to develop.
  • Videoblocks may present some threat to Shutterstock’s growth in video sales.
  • Growing the Enterprise segment of their business may get harder. Traditional sellers have reluctantly matched prices and become more price competitive. And given the more than 20,000 Enterprise customers Shutterstock is already serving, there are fewer and fewer high end customer left to steal from the traditional side of the business.

Copyright © 2015 Jim Pickerell. The above article may not be copied, reproduced, excerpted or distributed in any manner without written permission from the author. All requests should be submitted to Selling Stock at 10319 Westlake Drive, Suite 162, Bethesda, MD 20817, phone 301-461-7627, e-mail: wvz@fpcubgbf.pbz

Jim Pickerell is founder of www.selling-stock.com, an online newsletter that publishes daily. He is also available for personal telephone consultations on pricing and other matters related to stock photography. He occasionally acts as an expert witness on matters related to stock photography. For his current curriculum vitae go to: http://www.jimpickerell.com/Curriculum-Vitae.aspx.  


Be the first to comment below.

Post Comment

Please log in or create an account to post comments.

Stay Connected

Sign up to receive email notification when new stories are posted.

Follow Us

Free Stuff

Stock Photo Pricing: The Future
In the last two years I have written a lot about stock photo pricing and its downward slide. If you have time over the holidays you may want to review some of these stories as you plan your strategy ...
Read More
Future Of Stock Photography
If you’re a photographer that counts on the licensing of stock images to provide a portion of your annual income the following are a few stories you should read. In the past decade stock photography ...
Read More
Blockchain Stories
The opening session at this year’s CEPIC Congress in Berlin on May 30, 2018 is entitled “Can Blockchain be applied to the Photo Industry?” For those who would like to know more about the existing blo...
Read More
2017 Stories Worth Reviewing
The following are links to some 2017 and early 2018 stories that might be worth reviewing as we move into the new year.
Read More
Stories Related To Stock Photo Pricing
The following are links to stories that deal with stock photo pricing trends. Probably the biggest problem the industry has faced in recent years has been the steady decline in prices for the use of ...
Read More
Stock Photo Prices: The Future
This story is FREE. Feel free to pass it along to anyone interested in licensing their work as stock photography. On October 23rd at the DMLA 2017 Conference in New York there will be a panel discuss...
Read More
Important Stock Photo Industry Issues
Here are links to recent stories that deal with three major issues for the stock photo industry – Revenue Growth Potential, Setting Bottom Line On Pricing and Future Production Sources.
Read More
Recent Stories – Summer 2016
If you’ve been shooting all summer and haven’t had time to keep up with your reading here are links to a few stories you might want to check out as we move into the fall. To begin, be sure to complet...
Read More
Corbis Acquisition by VCG/Getty Images
This story provides links to several stories that relate to the Visual China Group (VCG) acquisition of Corbis and the role Getty Images has been assigned in the transfer of Corbis assets to the Gett...
Read More
Finding The Right Image
Many think search will be solved with better Metadata. While metadata is important, there are limits to how far it can take the customer toward finding the right piece of content. This story provides...
Read More

More from Free Stuff