WeCommerce Holdings Ltd earned a price target upgrade from analysts at Canaccord Genuity (TSX:CF, LSE:CF), who recommend holding the stock ahead of its planned merger.
The software company’s fourth quarter results beat the firm’s expectations on both the top and bottom lines, thanks in part to growth in its themes division. WeCommerce operates three segments: apps, themes and agency.
Canaccord upped its price target to C$5 from C$3.25 and changed its rating to ‘Hold’ from ‘Speculative Buy.’
Shares of WeCommerce traded 1.8% lower at C$4.49 Monday morning.
“The top- and bottom-line beat was driven by a resurgence in themes revenue with in-line Apps revenue, which was up 5% year-over-year,” the analysts wrote. “While agency segment recovery appears to be underway, we expect themes strength to drive sequential top-line growth while expanding margins further given lower salary costs post CEO Alex Persson's departure.”
The firm increased its 2023 estimates following the fourth quarter beat and considering the potential of WeCommerce’s planned merger with Tiny Capital Ltd. A shareholder vote on the proposal is scheduled for April 11.
“In our view, the combined entity would create a larger, diversified and higher-margin business, albeit with new management,” analysts wrote. “As a result of the transaction, we are moving to a HOLD (from Spec Buy) but raising our target to C$5 (from C$3.25).”
Cannacord also pointed to Stamped, a review and loyalty platform WeCommerce acquired in 2021. Stamped revenue growth in the fourth quarter was 8%, a reduced growth indicative of slowing merchant adds on Shopify, analysts noted.
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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