What a brutal six months it’s been for Shutterstock. The stock has dropped 27% and now trades at $16.06, rattling many shareholders. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.

Is there a buying opportunity in Shutterstock, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Do We Think Shutterstock Will Underperform?

Even with the cheaper entry price, we're cautious about Shutterstock. Here are three reasons why SSTK doesn't excite us and a 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 73.7% 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 10%, a decrease from This projection doesn't excite us and suggests its products and services will face some demand challenges.

3. EPS Growth Has Stalled

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Shutterstock’s flat EPS over the last three years was below its 6.1% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Shutterstock falls short of our quality standards. Following the recent decline, the stock trades at 2.8× forward EV/EBITDA (or $16.06 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. We’d recommend looking at the most dominant software business in the world.

Stocks We Like More Than Shutterstock

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