Loop Capital has upheld its Buy rating on SPS Commerce (NASDAQ: NASDAQ:SPSC) with a steady price target of $230. The firm's endorsement comes in the wake of SPS Commerce's acquisition of SupplyPike, which Loop Capital views as a strategic move.
The analyst's updated estimates now project $185 million in Adjusted EBITDA based on $633 million in revenues for 2024, and $220 million in Adjusted EBITDA from $735 million in revenues for 2025.
The acquisition of SupplyPike is seen as the largest deal for SPS Commerce to date and signifies a shift in strategy under the guidance of the relatively new CEO. The approach now favors mergers and acquisitions to enhance the company's capabilities and solutions, which can be cross-sold to the existing customer base to increase wallet share. This strategy diverges from the previous focus on consolidating the retail EDI space.
Loop Capital's analysis suggests that the SupplyPike acquisition will likely integrate well with SPS Commerce's current operations without disrupting the firm's established pattern of driving consistent growth and margin expansion.
In other recent news, SPS Commerce has made significant strides in its operations, most notably with the acquisition of SupplyPike for $206 million. This strategic move is expected to enhance the company's ability to support the intricate nature of retail supply chain operations and contribute approximately $8 million in revenue for the full fiscal year 2024.
Analyst firms, including DA Davidson, Baird, and Needham, have responded to these developments by raising their price targets on SPS Commerce's shares, maintaining a positive outlook on the company's financial performance.
The company's recent financial performance has been strong, with an 18% increase in year-over-year revenue and an earnings per share (EPS) increase of 16%. SPS Commerce projects its revenue for the third quarter to fall between $157.6 million and $158.6 million, indicating 16% to 17% year-over-year growth. For the full year of 2024, the company anticipates revenue between $624.2 million and $626 million.
In a further display of confidence, SPS Commerce has announced a new $100 million stock buyback plan. This move aligns with the firm's positive outlook and its commitment to deliver value to its shareholders.
InvestingPro Insights
InvestingPro data underscores the financial landscape surrounding SPS Commerce (NASDAQ:SPSC) following its strategic acquisition of SupplyPike. With a market capitalization of $6.99 billion and a high trailing P/E ratio of 95.35, the company's valuation reflects investor confidence, possibly buoyed by the positive outlook from analysts at Loop Capital. The company's revenue growth stands at a robust 18.47% over the last twelve months as of Q2 2024, indicating a strong upward trend that aligns with the expectations set forth by the acquisition strategy.
Two InvestingPro Tips further enrich our understanding of SPS Commerce's current financial health and future prospects. Analysts have revised their earnings upwards for the upcoming period, which may signal anticipation of continued growth and profitability. Additionally, the company operates with a moderate level of debt, suggesting a balanced approach to leveraging and financial stability. For investors looking to delve deeper into the company's potential, an additional 13 InvestingPro Tips are available, offering a comprehensive analysis of SPS Commerce's financial metrics and market position.
Overall, the data and insights provided by InvestingPro paint a picture of a company that is actively pursuing growth through strategic acquisitions, supported by a solid financial foundation and positive market sentiment. The additional tips available on InvestingPro provide a deeper dive into the nuances of SPS Commerce's financial health and investment potential.
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