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Stock Analyst Update

The Week in Stocks: Getty Images Looks Nice and Cheap

Plus, Western Union delivers a solid quarter, and more.

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Getty Images (GYI) reported third-quarter results on Tuesday. Revenue grew just 7% versus the year-ago quarter, marking the fifth straight quarter in which Getty's revenue growth rate declined. In Morningstar analyst Jonathan Schrader's opinion, Getty's trouble lies in its creative stills business, which can be further subdivided by licensing model: rights-managed and royalty-free. The rights-managed approach is the more traditional method of licensing imagery, often used by advertising and media firms. Royalty-free imagery distribution is a newer, less-complex, and cheaper licensing model. Though royalty-free imagery sales growth has far outstripped rights-managed sales growth, it has decelerated in recent quarters, taking Getty's top line with it. The reason, as Schrader explains, is the encroachment of micropayment Web sites onto the digital imagery market. However, Schrader points out that Getty already owns the market-leading micropayment Web site, iStockphoto, and Getty is investing aggressively not only in that unit but in other imagery distribution businesses and pushing to boost sales in developing countries. In short, Schrader believes that Getty's dominant market position, very strong cash flow, and nimble management should allow the company to ultimately regain its footing. Thus, he's leaving his fair value estimate unchanged and believes that the stock, after taking a beating in the past few months, is too cheap to ignore.
 Full Analyst Report: Getty Images

Western Union Delivers Solid Third Quarter
Western Union (WU) reported third-quarter results on Monday. Total revenue climbed 13% through the first three quarters of the year, driven by a 27% increase in consumer-to-consumer transactions and a 15% increase in consumer-to-business transactions. Though the company experienced some softness in U.S.-to-Mexico money-transfers (which generate about 25% of the firm's revenue) due to the ongoing immigration controversy, Morningstar analyst Mark Weber thinks that this is likely to prove a fleeting issue. Moreover, Weber is standing by his long-term growth thesis, as he believes that economically developed countries will continue to pull people from poorer countries who will remit money back to their countries of origin. Western Union's scale and resultant cost efficiencies should cement its advantages in that market, even amid cost pressures spurred by government regulation. Thus, he's not changing his fair value estimate.
 Full Analyst Report: Western Union

Jeffrey Ptak has a position in the following securities mentioned above: WU. Find out about Morningstar’s editorial policies.