Morgan Stanley Downgrades Commerce.com (CMRC) to Underweight

Morgan Stanley analyst Josh Baer downgraded Commerce.com (NASDAQ: CMRC) from Equalweight to Underweight with a price target of $4.00 (from $6.50).

The analyst comments: "We believe Commerce (formerly known as BigCommerce) is increasingly a share donor, with continued execution issues. The company's portfolio looks more like a collection of assets than an integrated platform – a structural disadvantage given the industry at large increasingly favoring 'unified commerce platforms'. Growth has decelerated materially – customer behavior, to which we have visibility, appears unfavorable (likely facing downsizing / churn). Most importantly, the business has yet to find a secure floor, leaving room for further estimate downside from here. The company's recent 8-K disclosing a plan to 'realign workforce with cost structure' further represents a demand issue in our view, with previous incremental capacity investments not translating to stronger bookings and growth prospects. Despite shares trading at a seemingly undemanding absolute valuation (~1x EV/ CY27 Sales vs peers ~2x, ), cheap can remain cheap when: 1) growth is stuck in the low-single-digits; 2) margin profile trails peers; and 3) management has repeatedly guided to a floor / impending acceleration that has failed to materialize. Normalizing for the company's slower growth and lower margins relative to peers does prove valuation more onerous. More broadly, we see shares taking longer to re-rate higher given weakening fundamentals and limited near- term catalysts, warranting a relative Underweight view."

For an analyst ratings summary and ratings history on Commerce.com click here. For more ratings news on Commerce.com click here.

Shares of Commerce.com closed at $3.73 yesterday.

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