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Investing.com -- SPS Commerce (NASDAQ:SPSC) shares fell sharply by 14% as the company’s first quarter and full-year guidance for 2025 disappointed investors, despite reporting fourth-quarter earnings that slightly exceeded analyst expectations.
The Minneapolis-based provider of cloud-based supply chain management solutions announced its fourth-quarter earnings per share (EPS) at $0.89, which was $0.02 higher than the consensus estimate of $0.87. Revenue for the quarter was reported at $170.9 million, surpassing the consensus estimate of $168.76 million. This revenue marked an 18% increase from the $145.0 million reported in the fourth quarter of 2023.
Despite the positive performance in the fourth quarter, SPS Commerce provided guidance for the first quarter of 2025 with an EPS range of $0.82-$0.84, falling short of the consensus estimate of $0.92. Additionally, the company’s forecast for Q1 2025 revenue stands at $178.5-180 million, closely aligned with the consensus of $179.2 million. For the full year of 2025, SPS Commerce expects an EPS of $3.78-$3.84 and revenue between $758-763 million, both slightly below the consensus estimates of $3.92 EPS and $761.2 million in revenue.
Wall Street analysts have adjusted their outlooks in response to the guidance. Citi analyst George Kurosawa lowered the price target to $200.00 from $233.00 but maintained a Buy rating, stating, "While we view the decel in organic growth as concerning, we are encouraged by the stronger margin and see multiple paths to improved growth, including expansion/cross-sell, intnl, and upmarket."
Needham analyst Scott Berg also lowered the price target to $210.00 from $230.00 while maintaining a Buy rating, noting, "We continue to believe SPS can sustain long-term 10%+ revenue growth with additional margin leverage, but are lowering our PT to reflect modestly lower near-term growth expectations."
Piper Sandler analyst Quinton Gabrielli adjusted the price target to $175.00 from $198.00 with a Neutral rating, commenting on the underwhelming net customer additions and stating, "While management continues to prove its ability to extract leverage from the business (30% FY25 EBITDA margins), initial FY25 organic revenue growth of just 10-11% will likely pressure shares tomorrow."
DA Davidson analyst William A. Jellison reiterated a Buy rating and $245.00 price target, expressing optimism about the company’s profit outlook and revised total addressable market (TAM), "We are maintaining our BUY rating on SPS Commerce in response to several 4Q datapoints which netted positively for our views on 2025 profits and the longer-term opportunity for the business."
The company’s CEO, Chad Collins, and CFO, Kim Nelson, both expressed confidence in the company’s ability to continue its profitable growth trajectory, highlighting the strength of SPS Commerce’s retail network and product portfolio. Despite these affirmations, the market’s reaction to the guidance suggests concerns about the company’s growth pace as it heads into 2025.
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