Amazon has introduced a new photo printing service, triggering the worst single-day decline in more than eight years for shares of Shutterfly.
The new AmazonPrints service offers printed photos starting at 9 cents each and photo books starting at $20. Cards and calendars will be additional options coming soon, according to the company's website.
Amazon's news in advance of the fourth quarter, when Shutterfly makes about half of its revenue from customers printing holiday cards and calendars, "couldn't come at a worse time" for Shutterfly, said Victor Anthony, an analyst at Axiom Capital Management who follows both companies.
Shutterfly didn't immediately respond to requests for comment.
Free photo storage is a feature of Amazon Prime membership, the online retailer's $99 a year subscription, which also includes delivery discounts and video and music streaming. The printing service provides Amazon a way to generate revenue from storing customer's digital pictures.
U.S. consumers will spend $2 billion this year on online photo printing services, which will continue to grow with the rise of photo sharing on social media, according to IBISWorld.
Shutterfly will generate 2016 revenue of $1.15 billion providing photo printing and related services, according to analyst estimates compiled by Bloomberg. Shares plunged 12% to $44.20 at the close Wednesday in New York, the biggest single-day fall for the Redwood City, California-based company since February 2008. Amazon's stock gained 1.2% to $789.74.
Shutterfly in March hired Chief Executive Officer Christopher North from Amazon, where he spent a decade expanding the company's business in the U.K. He began as CEO on May 31.
Shutterfly's stock drop was an "overreaction" to the Amazon news, according to a note from Colin Sebastian and Ben Gaither, analysts at Robert W. Baird & Co.
"Most Prime customers go to Amazon for the convenient and expedient shopping experience, whereas photobook curation tends to be a more time-consuming, customized transaction," the pair wrote in the note.
-- Bloomberg News