Unlocking Commerce Software Opportunities in 2024: Piper Sandler's Insights

Navigating the Commerce Software Landscape in 2024: Piper Sandler's Strategic Picks and Insights

Investment bank Piper Sandler, renowned for its insightful market analyses, guides us through the landscape, highlighting key opportunities and strategic picks for the year ahead. 

Piper Sandler's Perspective

As the Commerce Tech sector faced challenges in 2023, Piper Sandler, shifts its focus to the promising landscape of 2024. Despite the headwinds of the previous year, the firm envisions positive growth revisions and profitability strides, identifying top ideas to own in 2024. Among the standout names are Shift4 Payments (FOUR), GoDaddy (GDDY), and Wix.com (WIX).

2024 Outlook

While 2023 presented its share of hurdles, Piper Sandler remains optimistic about the Commerce Tech sector. Notably, excluding the exceptional performance of sub-cohorts like e-commerce, the sector, on average, underperformed the Nasdaq for the third consecutive year. However, Piper sees a compelling opportunity for positive growth revisions in higher quality names without sacrificing progress on profitability.

Top Picks for 2024

1. Shift4 Payments (FOUR)

• Attractive Trajectory: Piper Sandler recognizes an attractive trajectory for Shift4 Payments, driven by increased penetration among larger merchants, ongoing vertical expansion, and untapped monetization potential.
• Growth and Margins: Anticipating over 30% organic GRLNF (Gross Revenue Less Network Fees) growth in 2024 and an improvement in Q4 exit rate EBITDA margins to 48%, Piper raises its price target for Shift4 Payments to $93, maintaining an Overweight rating.

2. GoDaddy (GDDY)

• Margin Improvement: GoDaddy receives an upgrade from Neutral to Overweight as Piper acknowledges the rapid play-out of margins, positioning the company for a 29% NEBITDA margin exit rate in 2023.
• Growth Prospects: With an 8% growth in Domains bookings in the last quarter and a projected reacceleration to high-single-digit growth in 2024 with a 30%-plus NEBITDA margin, Piper envisions a reversal of a 5-year trend of multiple compression at GoDaddy.

3. Wix.com (WIX)

• Profitability Emphasis: Wix.com's emphasis on profitability positions the company for significant free cash flow/share improvement in 2024 and beyond.
• Price Target: Piper raises the price target for Wix.com to $146, emphasizing the company's potential to double free cash flow over the next two years to $500M by 2025.

Adjustments and Downgrades

Piper Sandler strategically adjusts its positions in response to market dynamics:

1. Semrush (SEMR)

• Balanced Risk-Reward: Semrush sees a downgrade to Neutral from Overweight, with a price target of $14, acknowledging a more balanced risk-reward scenario following a 55% move since October.

Other Rating and Target Changes:

• Lightspeed Commerce (LSPD): Price target raised to $20 from $18 (Neutral-rated)
• Toast (TOST): Price target raised to $18 from $17 (Neutral-rated)
• Vtex (VTEX): Price target raised to $9 from $7 (Overweight-rated)

As Piper Sandler positions its portfolio for 2024, investors are urged to consider these insights, emphasizing the potential for growth, profitability, and strategic adjustments in the evolving Commerce Tech landscape.

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