NEW YORK (TheStreet) -- Shares of Shutterfly (SFLY) - Get Report were advancing on heavy trading volume late Thursday afternoon as Cantor Fitzgerald said yesterday's selloff in reaction to Amazon.com (AMZN) launching a new photo service was an "overreaction."
"Amazon's entry into the photo print business (using S&D Prints for fulfillment) creates a significant headline risk for SFLY, just like Apple (AAPL), Google (GOOGL) and Walmart (WMT) have over the last several years. That said, just like in those instances, the stock's overreaction (down 12%) keeps us positive on the name," the firm wrote in an analyst note.
The firm believes that Shutterfly's repository of 28 billion photos uploaded by about 10 million customers online and unlimited free storage creates significant switching costs.
Additionally, the company's vertically integrated model, which differs from most competitors, gives it more control over quality and costs.
Shutterfly's scale also gives it a significant cost advantage and it is a strong household name focused exclusively on online prints, Cantor added.
But given Amazon.com's brand reputation and consumer reach, it's hard to dismiss it as a serious competitor to Shutterfly, the firm noted.
"We estimate that Shutterfly's traditional print business is mid-single digit (as a % of rev), and given the company's success in the past vs. Snapfish, Google and Walmart, we do not view pricing as the primary consideration," Cantor said.
The firm reiterated a "buy" rating and $55 price target on Shutterfly stock.
The Redwood City, CA-based online image publishing service offers photo books, photo cards and stationary.
More than 1.99 million of the company's shares traded so far today compared to its average volume of 425,167 shares per day.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C on Shutterfly stock.
The primary factors that have impacted the rating are mixed. The company's strengths can be seen in multiple areas, such as its solid stock price performance, impressive record of earnings per share growth and revenue growth.
But the team also finds that the company's cash flow from its operations has been weak overall.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: SFLY