SPS Commerce (SPSC) Stock Forecast & Price Target

SPS Commerce Inc. has reported a robust total revenue increase of 17.9% year-over-year, marking the 96th consecutive quarter of growth, while recurring revenue surged approximately 19%. The company demonstrated strong customer engagement, adding 150 new recurring revenue customers, bringing the total to 45,350, and achieved a significant 18% year-over-year increase in wallet share per customer, now averaging $14,300. Additionally, operating cash flow improved to $40.6 million, reflecting a healthy margin increase to 23.7%, underscoring the company's solid financial performance and sustainable growth trajectory.

SPS Commerce is facing a negative outlook due to a projected decrease in long-term revenue growth from an average of 15% for CY22 to CY24 to an estimated 11% to 13% for CY25, primarily driven by sluggish customer acquisitions. Despite recording adjusted EBITDA of $49.6 million, the company's inability to maintain customer growth—which is projected to be merely 300 net additions for CY24 compared to a five-year average of 1,900—raises concerns regarding future performance. Additionally, the revision of the terminal period revenue estimate from $3.2 billion to $2.7 billion reflects diminishing confidence in the company's growth trajectory amidst increasing competition and the need for technological adaptation.