On Friday, Barclays (LON:BARC) analysts adjusted their stance on BigCommerce Holdings (NASDAQ:BIGC), downgrading the e-commerce platform's stock from Equal Weight to Underweight, and also lowered the price target to $7.00 from the previous $8.00. The revision in rating and price target comes in response to the company's performance challenges and the broader economic environment. InvestingPro data shows that 9 analysts have recently revised their earnings downward, with price targets now ranging from $6 to $11.
BigCommerce shares have struggled, declining 32% in 2024, while the broader iShares Expanded Tech-Software Sector ETF (IGV) and the S&P 500 index each saw gains of 27% and 24%, respectively. Barclays points to execution issues and a tough macroeconomic climate that has hindered BigCommerce's ability to attract new customers and upsell to existing ones as the primary reasons for the downgrade.
Despite these challenges, BigCommerce has initiated several strategic changes aimed at improving its trajectory. Notably, the company appointed Travis Hess (NYSE:HES) as the new CEO and announced various go-to-market strategy alterations.
InvestingPro analysis reveals the company maintains impressive gross profit margins of 76.65%, providing a strong foundation for future growth. Barclays acknowledges these efforts, suggesting that they could lead BigCommerce back to profitable growth in the future. However, the firm anticipates that the impact of these changes will be gradual.
The analysts at Barclays believe that while the long-term outlook may be positive due to the recent strategic shifts, the short-term performance of BigCommerce is likely to lag during a period of recovery for the software sector. This expectation is the basis for the adjustment in their rating to Underweight, with a price target that reflects a 2x EV/CY26E sales multiple, unchanged from their prior valuation method.
For deeper insights into BIGC's valuation and growth potential, InvestingPro subscribers can access comprehensive analysis, including Fair Value estimates and 8 additional ProTips that could help inform investment decisions.
In other recent news, BigCommerce reported a robust third quarter in 2024, with total revenue reaching approximately $84 million, a 7% increase from the previous year. Subscription revenue also saw a 7% rise to around $63 million. The company's non-GAAP operating income significantly improved, going from a $1 million loss in the same quarter the previous year to over $4 million. New CEO Travis Hess has outlined a strategic focus on profit and cash flow, with plans to cater to discerning customers, especially in the B2B and small business segments.
A key part of BigCommerce's strategy involves investing in AI capabilities and integrating flagship products with Feedonomics and MakeSwift to drive growth. Looking forward, the company projects its Q4 revenue to range between $85.8 million and $87.8 million and its full-year revenue guidance for 2024 to be between $331.7 million and $333.7 million, indicating a 7% to 8% growth. Despite acknowledging a decline in enterprise accounts over the past three quarters, the company remains optimistic about its growth potential, particularly through its AI investments.
These developments showcase an active and strategic approach from BigCommerce towards operational improvements and efficient revenue growth. The company's Investor Day, scheduled for March 11, 2025, is expected to provide further insights into its long-term strategies.
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