BigCommerce (BIGC): Buy, Sell, or Hold Post Q1 Earnings?

BigCommerce’s stock price has taken a beating over the past six months, shedding 20.7% of its value and falling to $4.92 per share. This might have investors contemplating their next move.

Is there a buying opportunity in BigCommerce, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think BigCommerce Will Underperform?

Even though the stock has become cheaper, we don't have much confidence in BigCommerce. Here are three reasons why you should be careful with BIGC and a stock we'd rather own.

1. Weak ARR Points to Soft Demand

While reported revenue for a software company can include low-margin items like implementation fees, annual recurring revenue (ARR) is a sum of the next 12 months of contracted revenue purely from software subscriptions, or the high-margin, predictable revenue streams that make SaaS businesses so valuable.

BigCommerce’s ARR came in at $350.8 million in Q1, and over the last four quarters, its year-on-year growth averaged 4%. This performance was underwhelming and suggests that increasing competition is causing challenges in securing longer-term commitments.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect BigCommerce’s revenue to rise by 3.7%, a deceleration versus This projection doesn't excite us and implies its products and services will face some demand challenges.

3. Operating Losses Sound the Alarms

While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.

BigCommerce’s expensive cost structure has contributed to an average operating margin of negative 10.7% over the last year. Unprofitable software companies require extra attention because they spend heaps of money to capture market share. As seen in its historically underwhelming revenue performance, this strategy hasn’t worked so far, and it’s unclear what would happen if BigCommerce reeled back its investments. Wall Street seems to think it will face some obstacles, and we tend to agree.

Final Judgment

BigCommerce doesn’t pass our quality test. Following the recent decline, the stock trades at 1.1× forward price-to-sales (or $4.92 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are more exciting stocks to buy at the moment. Let us point you toward the most entrenched endpoint security platform on the market.

Stocks We Would Buy Instead of BigCommerce

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