Deutsche Bank initiated coverage on Shopping.com (SHOP) with a sell rating.
Analyst Jeetil Patel says Shopping.com faces significant risks related to its dependence on search engines for the majority of traffic and rising competition. He believes the current valuation does not fully reflect risks.
He says changes to search engine algorithms could eliminate Shopping.com Web pages from search results, reducing traffic, lead, and revenue generation. He notes a rising paid-search pricing could hamper operating margins and/or reduce profitable traffic acquisition opportunities should Shopping.com be unable to increase its own pricing.
Patel notes that brand building is key, but comes at cost. He set a $20 price target.