Consumer Products

Analysts Strike... The Death of CafePress

CafePress Inc. (NASDAQ: PRSS) has not been public anywhere long enough to have the post-earnings reaction that we are seeing today.  The company gave a really poor guidance based in part on European weakness and in part on broader headwinds and weak political sales.  The problem is that this printer and seller of tee-shirts, cups, and other on-demand printed items has only been public since the end of March.

Now we have the analysts bailing on the stock.  Janney Capital Markets maintained its buy rating but we have seen that Cowen cut the rating down to Neutral from Outperform and J.P. Morgan has cut the rating down to Neutral from Overweight.

Shawn Milne of Janney Capital Markets has a 414 fair value and said, “PRSS reported Q2 revenue, Adjusted EBITDA, & Non-GAAP EPS of $47.1M, $4.0M, and $0.10 vs. Street at $49M, $4.2M and $0.10 and our recently lowered estimates of $47.6M, $3.5M and $0.07. PRSS is taking an even more cautious 2H view than we previewed due to election cycle/Europe macro – driving a significant 35-40% correction in the stock price. We are lowering our FY13 growth rate to 18% (from 27%) and believe $30M in EBITDA is an achievable range – putting the stock at ~3.0 EV/EBITDA and ~0.4x FY12 EV/Sales. While we are certainly disappointed with outlook, with $3.50 in cash per share, we believe ~$9 is a reasonable entry price and hence we maintain our BUY (rating).”

CafePress shares are getting skunked with more than a 41% drop down to $8.05 on the day.  We have not even seen 600,000 shares trade as of yet in less than two-hours of trading and the prior post-IPO range had been $12.12 to $22.69.

Here was our IPO observation when it came public: “The offering was for only 4.5 million shares at a price of $19.00.  We had a price range of $16.00 to $18.00 and the demand was high enough for a premium pricing.  Of the offering, 2.5 million shares are being sold by the company and 2 million shares are coming out from selling shareholders.  The company will have 16,978,700 shares outstanding after this offering.”

If there is one thing we have seen, it is simply this lesson: for a company to fall this far from grace this soon after an IPO, a real recovery would take a miracle.  Ultimately, we think that Inc. (NASDAQ: AMZN) or another online physical products player could easily acquire this outfit.  Yahoo! Finance lists the new price-adjust market cap as being only $136 million.


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