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Vistaprint Upgraded to Neutral - Analyst Blog
11/25/2011 11:15:00 AM
We have recently upgraded Vistaprint N.V. ( VPRT ) to Neutral from Underperform based on better-than-expected fiscal first quarter 2012 results, an upbeat guidance, deeper focus on inorganic growth as well as international expansion. The positives were, however, partially offset by margin pressure and execution risk related to a set of initiatives taken by management to revamp its business.
Vistaprint's first-quarter adjusted earnings per share beat the Zacks Consensus Estimate. The company registered a 25% year-over-year growth in revenues which surpassed the Zacks Consensus Estimate as well.
Buoyed by the momentum, management guided higher for full-fiscal 2012 adjusted earnings in the range of $1.74 to $1.86 (versus $1.58 to $1.68 provided in August) per share. Management expects to gain $2 billion revenue over the next five years.
Vistaprint has grown at a rapid pace, increasing annual revenues from $6.1 million in fiscal 2001 to $817.0 million in fiscal 2011, and all of its growth since inception has been organic. However, of late, management is concentrating on strategic partnerships and acquisitions to spur future growth. The new alliance with Staples will extend Vistaprint's reach to 1,600 retail locations of the former across the U.S.
The company is also strengthening its geographical footprint. In Europe, Vistaprint has a strong distribution channel and customer base. With the recent acquisition of Dutch photo book and photo product company Albumprinter Holding B.V., Vistaprint further strengthened its pan-European customer base. This Dutch acquisition is expected to add about $37 to $39 million of revenue for the remainder of fiscal 2012. Compared with Europe, the company has a negligible presence in Asia Pacific. The company plans to enter into markets apart from its existing ones followed by the increased traction experienced in that region. In the first quarter of 2012, Vistaprint had 45% constant currency growth in Asia Pacific, up from 39% recorded in the prior quarter.
On the flip side, net margins in fiscal 2012 will likely be lower than fiscal 2011 due to higher investments in manufacturing to improve product quality and lower unit manufacturing costs as well as in marketing to facilitate revenue and earnings growth over five years. However, all of management's initiatives to revive its business involve certain execution risks.
Furthermore, first quarter earnings beat the consensus, but decreased 14% year over year. The company expects only modest earnings growth from fiscal 2012 to 2013, and then strong growth in fiscal years 2014 through 2016.
The nagging tension over the Euro-zone debt crisis also poses some concerns given Vistaprint's increasing exposure in that region. The fact can be validated by the deceleration in sales growth in Europe in the first quarter of 2012.
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