On Friday, Stifel analysts revised their price target for SPS Commerce (NASDAQ:SPSC) stock, lowering it to $225 from the previous $250, while still keeping a Buy rating on the shares. Currently trading at $184.98, InvestingPro analysis indicates the stock is trading above its Fair Value. The adjustment follows SPS Commerce’s announcement of its latest acquisition, which marks the largest in the company’s history.
SPS Commerce, with its robust financial health score of GOOD according to InvestingPro data, reported on Thursday that it had acquired Carbon6 Technologies for approximately $126 million in cash and $84 million in SPS Commerce stock. The company’s strong balance sheet, with liquid assets exceeding short-term obligations and moderate debt levels, positions it well for such strategic moves.
Carbon6 Technologies, established in 2021, specializes in creating software tools for Amazon (NASDAQ:AMZN) sellers, focusing on revenue recovery and invoice deduction features. This acquisition comes shortly after the company’s purchase of SupplyPike for $206 million, which operates in a similar domain of invoice deduction.
The management at SPS Commerce intends to initially offer both the newly acquired and the existing products separately. However, they are considering strategic options to potentially merge them into a single invoice deduction solution that would serve all suppliers.
Analysts at Stifel have expressed their belief that SPS Commerce will announce an expanded total addressable market (TAM) by 2025, with a vertical focus that includes Fulfillment, Analytics, and the newly enhanced invoice deduction functions. This expansion is anticipated to bolster the company’s cross-selling opportunities in the future.
Investors and analysts are looking forward to gaining further insights into SPS Commerce’s organic growth trajectory during the company’s fourth-quarter earnings call. Despite the reduction in the price target, Stifel reaffirms its confidence in the stock with a continued Buy recommendation, anticipating that SPS Commerce will maintain its growth momentum and capitalize on its recent acquisitions.
In other recent news, SPS Commerce, a provider of cloud-based supply chain management solutions, reported a robust 21% increase in Q3 2024 revenue, hitting $163.7 million. This growth was reflected in recurring revenue and a 19% rise in adjusted EBITDA to $48.4 million. The firm’s strong performance was partially driven by strategic acquisitions such as SupplyPike and Traverse Systems.
Loop Capital has maintained a Buy rating with a $230 price target for SPS Commerce, while Needham reiterated its Buy rating following the company’s acquisition of Carbon6. Baird also raised its price target for SPS Commerce to $188, maintaining a Neutral rating. Despite a slowdown in new customer acquisitions noted by Piper Sandler, SPS Commerce projects Q4 2024 revenue between $168.5 million and $169.5 million, indicating an expected full-year revenue growth of 18% to 19%.
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