Summary
- ChannelAdvisor's stock is attractively valued and long-term investors can buy the stock around the current price.
- The company has couple of strong growth drivers, which ensures its stock has significant upside in the long term.
- Global e-commerce revenue will grow in the high single digits in the long term, which is favorable for ChannelAdvisor's revenue growth.
ChannelAdvisor's (NYSE:ECOM) stock is attractively valued compared to its peers. Currently the stock is hovering around its 52-week high. The company delivered good results in the first quarter of 2020 and remained unaffected to the coronavirus pandemic. The company has a couple of strong growth drivers, which will drive its revenue higher in the coming years. Long-term investors can buy the stock around the current price.
ChannelAdvisor offers its customers a cloud-based Software-as-a-Service (SaaS) e-commerce platform. The platform helps brands and retailers expand sales by connecting with consumers around the world through hundreds of channels, including Amazon (NASDAQ:AMZN), eBay (NASDAQ:EBAY), Facebook (NASDAQ:FB), Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and Walmart (NYSE:WMT). The company offers fulfillment solutions which help its customers connect to their supply chain. The company helps its customers send their web visitors directly to authorized resellers. To ensure that its customers operate on the same version of its software, ChannelAdvisor offers a single code base and multi-tenant software architecture.
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Growth Drivers
SaaS Platform
ChannelAdvisor's SaaS e-commerce platform for online sales is its primary growth driver. Through this platform, the company offers solutions to its customers (brands and retailers) that help them easily integrate, manage and optimize their online sales across lots of available channels. The platform provides a single web-based interface which offers a unified view enabling the company's customers to cost effectively manage product listings, inventory availability, orders and fulfillment, and data analytics. Since this platform makes online sales simple with reporting and analytics, it enjoys good demand and popularity among brands and retailers. According to a report:
The digital commerce software market was valued at USD 5733.44 million in 2019 and is expected to reach a market value of USD 10397.24 million by 2025, registering a CAGR of 12.64% during the forecast period (2020 - 2025).
ChannelAdvisor's SaaS revenue will grow at a similar rate. However, the company doesn't provide its SaaS revenue separately. It reports its total revenue. Its total revenue for full-year 2019 was $130.0 million.
Although amid fierce competition, registering a CAGR of 12.64% for revenue growth is difficult, it is not impossible for ChannelAdvisor. The company offers automation, analytics and optimization tools to its customers, which help them grow their businesses. As a result, ChannelAdvisor can retain its existing customers and attract new customers. Therefore, I believe the company will be able to achieve low-teens growth rate in the long term.
Modules
The company offers a number of modules, which is its another growth driver. These modules include marketplaces, digital marketing, where to buy and product intelligence. Each module is integrated with the platform's underlying inventory management system, templates and reporting system. A particular module integrates with a particular type of channel, such as third-party marketplaces, digital marketing websites or authorized reseller websites. These modules also support specific online functionalities, which allow customers to modify online storefronts, employ media, advertise products, etc.
The marketplaces module helps customers connect to third-party marketplaces, while the digital marketing module connects customers to comparison shopping websites. The where to buy module helps customers provide their web visitors up-to-date information about the authorized resellers. The product intelligence module provides brands and retailers insights about online assortment, product coverage gaps and pricing trends.
The company offers its software suite through the modules. Each module is priced individually. These modules strengthen the company's SaaS platform and help grow revenue. However, the company doesn't provide its revenue from modules separately. If we assume the modules are parts of the SaaS platform (since the main software is offered through them), we can say they will also grow at a CAGR of low-teens in the long term.
