Over the past six months, Shutterstock’s shares (currently trading at $16.04) have posted a disappointing 13.3% loss, well below the S&P 500’s 8.5% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Shutterstock, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Shutterstock Will Underperform?
Even with the cheaper entry price, we’re sitting this one out for now. Here are three reasons we avoid SSTK, plus one stock we’d rather own.
1. Customer Spending Decreases, Engagement Falling?
Average revenue per request (ARPR) is a critical metric to track because it measures how much the company earns in transaction fees from each request. ARPR also gives us unique insights into a user’s average order size and Shutterstock’s take rate, or “cut”, on each order.
Shutterstock’s ARPR fell over the last two years, averaging 87.9% annual declines. This raises questions about its ability to engage users and signals its platform’s value is eroding. 
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Shutterstock’s revenue to drop by 19%, a decrease from This projection doesn’t excite us and indicates its products and services will face some demand challenges.
3. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Shutterstock, its EPS declined by 6.3% annually over the last three years while its revenue grew by 3.9%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
We see the value of companies helping consumers, but in the case of Shutterstock, we’re out. Following the recent decline, the stock trades at 1.1× forward price-to-gross profit (or $16.04 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward a top digital advertising platform riding the creator economy.
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