BigCommerce sees world progress in on-line gross sales growth

By Christiana Sciaudone – Like many other IPOs in 2020, BigCommerce Holdings Inc (NASDAQ 🙂 took off with a bang, with stocks nearly tripling on the first day of trading.

The Software as a Service (SaaS) e-commerce platform company has fallen more than 35% since then, in part because of skepticism about upcoming benchmarks (with so many vendors going online, 2020 was a pretty good year) , partly because of something growing and tech was knocked down when it reopened – it has done worse so far this year.

However, for Chief Financial Officer Robert Alvarez, the long-term outlook is really important. And with BigCommerce's bet on a more flexible and modern platform than the competition, it will be there quickly, he said.

"We designed an entire architecture to make integration easier," Alvarez said in an interview last week. "This level of adjustment is a big part of why we think we're going to be quite disruptive to the market."

What does it all actually mean? BigCommerce gives companies the technology to support and easily expand their websites. It uses a headless architecture, which means that it is plug and play with various types of old and new technologies, unlike competitors that require customers to be completely on their platforms. Without the ability to plug and play, retailers can incur high costs, time, and resources creating or rebuilding software.

It's a nuanced view of the market, said Needham analyst Scott Berg. Large companies need the depth of functionality and flexibility that BigCommerce can provide – compared to smaller companies that can do well with a base platform – and that is the goal.

"BigCommerce took the approach of changing the platform to serve the larger upper end of the market and they did a very effective job," Berg said in a phone interview.

The company's closest competitor is Magento, owned by Adobe (NASDAQ 🙂 and "semi-effectively" competing, according to Berg. However, to really keep up with BigCommerce, it would require investments in research and development – but that's not necessarily the focus.

"The more complex the business, the more integrations you need," said Alvarez. "We really shine there, what we have done needs to be differentiated."

The pace of innovation in e-commerce is accelerating daily, weekly, and retailers want to expand quickly around the world and use the modern stack and modern code language of BigCommerce. Customers are SkullCandy, PayPal Holdings Inc. (NASDAQ 🙂 and General Electric (NYSE :). In particular, annual recurring revenue (a closely watched SaaS business metric that shows how much recurring revenue to expect per year from memberships) in business plans (for medium and large companies) increased 58% in the first quarter.

International business is also growing, and annual recurring revenue increased 65% in the first quarter. Alvarez said.

"E-commerce outside of the US is growing even faster," said Alvarez.

Regarding the poor performance of the share price, Alvarez cited strong results for the second quarter of 2020 and investor expectations for the current quarter: "Is the company doing well because of last year, or is the company doing well anyway?"

The recent decline in tech stocks overall resulted in Analyst Berg lowering his target price by 30% to match "valuation compression in space."

Still, the "fundamentals of the business are really strong," Berg said.

Earlier this month Morgan Stanley (NYSE 🙂 moved the stock from underweight to equal weight, recognizing the increasingly strategic importance of its ecommerce software. With solid fundamentals and a more reasonable valuation, we are upgrading from UW to EW while targeting price remains at $ 57. "

BigCommerce has also not yet reported a profit and does not expect one in the short term. Alvarez said break even is expected in late 2022, largely due to investments in growth areas.

"We believe this market is huge. The window to really differentiate ourselves is straight," said Alvarez.

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