BigCommerce is a “show me” stock, according to analysts at Canaccord Genuity (TSX:CF, LSE:CF).
The firm maintained its Buy rating, but lowered its price target to $10 from $12, noting that the ecommerce company’s first quarter results “fine, not great,” in a note to clients.
On the bright side, enterprise annual recurring revenue growth stayed above 21%, which analysts noted is an important threshold. However, net new ARR of $4.8 million was the lowest it has been in 3 years.
“Zooming out a bit, while the enterprise market remains challenging at the moment, we got the sense that management was pleased with early efforts in the up-market shift of [go to market] focus – the firm shared that enterprise pipeline at the start of Q2 is roughly 20% higher than it was a year ago,” the analysts said.
BigCommerce shares traded 4.4% higher Wednesday afternoon at $7.35.
That’s cheap, the analysts said, which is reflective of declining growth and high free cash flow losses.
“The next couple of quarters could be interesting – pricing increases on the retail (low-end) base go into effect in June, so we could see a bit of Q2 upside, but we probably won’t know the impact on retention until sometime in Q3,” analysts said.
They continued, “The bottom line is that this is a ‘show me’ story with respect to the firm’s enterprise push. The stock is cheap enough here that it makes sense to stick around to see what kind of success the firm can garner. If BigCommerce can deliver on its goal of 20%+ enterprise ARR growth and EBITDA profits by Q4, then we’re pretty confident this stock will trade at something better than 2x revenue in the future..
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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