Vistaprint (VPRT) Remains Neutral

We maintain our Neutral recommendation on VistaPrint NV (VPRT ), an online supplier of high-quality graphic design services and customized printed products to small businesses and consumers. Vistaprint reported third-quarter 2010 earnings of 35 cents, ahead of the Zacks Consensus Estimate of 31 cents. The results were driven primarily by higher-than-expected revenue increases. Key operating metrics year-over-year increase in revenues to $166.0 million. Excluding the impact of foreign exchange fluctuations, the company reported a 25% year-over-year growth in revenues.

For the fourth quarter, Vistaprint expects adjusted earnings of 35 cents to 38 cents per share. On a reported basis, the company expects earnings in the range of 24 cents to 27 cents per share, based on estimated revenues in the range of approximately $169 million to $174 million. The current Zacks Consensus Estimate for the fourth quarter is 25 cents per share.

For full fiscal 2010, the company expects earnings to range from $1.95 to $1.98 per share, excluding stock compensation costs. On a GAAP basis, earnings are projected to range between $1.47 and $1.50 per share, based on expected revenues in the range of approximately $675 million to $680 million. The current Zacks Consensus Estimate for the fourth quarter is $1.49 per share.

Vistaprint primarily targets the small business market, particularly businesses or organizations with less than 10 employees, and often with less than 5 employees. This focus presents Vistaprint with substantial market opportunity, as the company estimates a presence of approximately 50 million small businesses of this size throughout the United States, Canada and the European Union. Moreover, the scale of Vistaprint’s operation gives small business customers access to quality products and printing services that would otherwise have been out of their reach.

Vistaprint has grown at a rapid pace, increasing annual revenues from $6.1 million in fiscal 2001 to $515.8 million in fiscal 2009, and all of its growth since inception has been organic. Vistaprint is also strengthening its geographical footprint. It already has a strong international presence in Europe and Continental Europe. Presently, Vistaprint is poised to tap the immense growth opportunity in the Asian Market through the launch of an Asia Pacific marketing office in Australia, and the likely launch of localized sites in South Korea, Taiwan, Hong Kong and Singapore.

However, considering the sluggish economic recovery, slowing growth of new customer additions and stiff competition, we are compelled to harbor concerns about Vistaprint. Moreover, increased marketing costs stemming from the company’s national television ad campaign and expected currency headwinds for the fourth quarter will likely hurt its earnings. Vistaprint’s recently acquired company “soft Sight’ is also not expected to generate revenue before first half of fiscal 2011. Hence, we retain our long-term neutral rating on Vistaprint. We have a Zacks #4 Rank on Vistaprint which translates into a short-term Sell rating.

VISTAPRINT NV (VPRT): Free Stock Analysis Report
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