Thursday, September 24, 2009

VistaPrint (NASDAQ:VPRT): Upgraded to Buy from Hold at Needham

Needham is upgrading their rating on VistaPrint (NASDAQ:VPRT) to Buy from Hold:

After a recent meeting w/ mgmt and following a major update of our model to better reflect the launch of digital services and recent currency exchange rate changes, we are revising our forecasts, upgrading our recommendation to Buy from Hold, and initiating a 12-month price target of $60 (23% above current levels). For 1QFY10, our revenue and adj. EPS estimates increase to $142MM and $0.39, resp., and are above guidance and the consensus means. For 2QFY10 and beyond, our revenue estimates are above guidance and consensus but our EPS is at the low-end (or below is some cases) due to recent currency exchange rate changes. We believe business continues to perform at least in-line w/ expectations, w/ order growth >25% YoY, stable AOVs, and continued favorable customer acquisition cost trends. The company is also pursuing strategies to sustain growth, such as establishing a presence in the APAC region, infrastructure expansion in Europe, enhancing customer support resources, expanding its consumer/home offering, and rolling out a partnership w/ FedEx Office, among other things. Our model assumes digital services (i.e., websites and email marketing) could contribute $22MM in high-margin revenue in FY10. The strong U.S. Dollar (USD) on a YoY basis should still negatively impact revs and gross margins in 1QFY10, but likely not as much as contemplated in current guidance. For forecasting purposes, if we assume exchange rates remain stable at current levels, we estimate an F/X benefit to revenues but a slight negative to gross margins and EPS. However, we believe this possible F/X headwind will be more than offset by growth in digital services as well as other growth initiatives.

Action: This is a controversial name with a business model that has many doubters - just look at Citron's comments or 33,9% short interest. Yet the analyst community is overwhelminly positive on the stock with just about everybody having positive rating on the name. That makes me wonder if there is new longer-term money willing to come in at these levels.. even with new Street high estimates for current quarter from Needham.

The traders will definitely try to push this one as high short interest makes it an attractive target for a short squeeze. They will probably succeed initially and send the stock close to $50 and maybe higher. Just don't mistake it for real buying interest. Most likely the day highs will be made in the first 15-30 minutes and the stock will tick down afterwards - like GYMB did on Tuesday.

1 comment:

  1. Guess I underestimated the power of short squeeze. I've never liked depending on short squeeze as the sole reason for a move, but as an amplifier it can create bigger movements than expected.