On Friday, Baird increased the price target for SPS Commerce (NASDAQ:SPSC) to $186.00, up from the previous target of $178.00, while maintaining a Neutral rating on the stock. The firm's stance comes after evaluating the company's financial performance, which showed a revenue increase of 18% year-over-year, including an estimated organic growth of 14% year-over-year.
The report highlighted that the adjusted EBITDA margin remained consistent at 29% compared to the same period last year, and earnings per share (EPS) saw a 16% increase year-over-year, which was a 4% upside from expectations.
According to the analyst, the organic growth of SPS Commerce continues to be driven by increased wallet share capture, especially through community enablement campaigns focused on the existing customer base. The number of organic customer additions concluded at 100, a decrease from 250 year-over-year.
In terms of future outlook, Baird noted that the forecast for the fiscal year 2024 has been adjusted upwards, reflecting the second quarter's organic growth and contributions from mergers and acquisitions. However, the expectations for the second half of the year remain in line with the company's original projections. The implied revenue and EBITDA for the latter half of the year are said to match the consensus estimates.
The adjustment in the price target reflects a recognition of the company's performance in the second quarter of 2024 and its potential for continued growth within its current customer base. Despite the positive aspects of the report, Baird's Neutral rating suggests a stance of caution or a wait-and-see approach to the stock at the current time.
In other recent news, Needham has raised its price target for SPS Commerce shares to $230, while maintaining a Buy rating.
For the third quarter, SPS Commerce projects its revenue to fall between $157.6 million and $158.6 million, indicating 16% to 17% year-over-year growth. The company expects its full-year revenue for 2024 to be between $624.2 million and $626 million. Despite potential challenges such as customer consolidation and an uncertain retail environment, SPS Commerce maintains a long-term goal of at least 15% annual revenue growth.
In a further display of confidence, SPS Commerce announced a new $100 million stock buyback plan, reinforcing the company's belief in its near-term growth prospects.
InvestingPro Insights
SPS Commerce (NASDAQ:SPSC) has garnered attention with its robust revenue growth and consistent EBITDA margins, as noted by Baird. Complementing this analysis, InvestingPro data further enriches the financial picture of the company. The market cap of SPS Commerce stands at $7.61 billion, with a high P/E ratio of 110.9, reflecting the market's optimistic valuation of the company's earnings potential. This is further emphasized by a P/E ratio of 111.1 over the last twelve months as of Q1 2024. Additionally, the company has shown a strong gross profit margin of 66.0%, suggesting efficient cost management relative to its revenues, which have grown by 18.89% over the same period.
Investors considering SPS Commerce may find InvestingPro Tips particularly insightful. Analysts have noted that the company is trading at a high earnings multiple, which could impact future investment returns. Moreover, the stock is trading near its 52-week high, with a price that is 94.0% of this peak. While this could indicate market confidence, it also suggests limited upside potential from current levels. For those looking to delve deeper into SPS Commerce's financials and future prospects, InvestingPro offers additional tips and metrics. There are 15 more InvestingPro Tips available for SPS Commerce, which can be accessed through the dedicated page at Investing.com/pro/SPSC. Remember to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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