Last Update 11 Dec 25

SPSC: Share Repurchases And Durable Cash Flows Will Support Future Upside

Analysts have sharply reduced their price targets on SPS Commerce to a range of $80 to $110 from prior levels as high as $170, citing constrained near term growth, a weaker retail end market, and tempered long term growth expectations despite the company’s still solid fundamentals.

Analyst Commentary

Street research reflects a more balanced but cautious stance on SPS Commerce, with recent notes highlighting both the durability of the business model and the near term pressures on growth, execution, and valuation.

Bullish Takeaways

Bullish analysts argue that the recent selloff, following the company’s first weak quarter as a public company, has pushed sentiment to “peak pessimism,” creating a more attractive entry point relative to the long term quality of the business.
Despite lowering price targets, some view the stock’s pullback as overdone versus SPS Commerce’s still solid network effects, recurring revenue base, and a mid to high single digit long term growth profile. This supports a more constructive stance on the shares after the recent weakness.
Longer term expectations have been recalibrated to a more mature growth phase. Bulls see this as consistent with a high quality software franchise that can still compound earnings, which they argue justifies valuation above recent trough levels.
Even after guidance cuts, bulls see room for operational execution improvements and potential re-acceleration as macro headwinds ease. This creates perceived upside to current depressed growth assumptions embedded in reduced targets.

Bearish Takeaways

Bearish analysts highlight that near term growth is likely to remain constrained, with a weaker retail end market and delayed purchasing decisions limiting catalysts for revenue acceleration and keeping the stock range bound.
The Q3 revenue miss, driven in part by a miscalculation in the acquired Revenue Recovery business, and a cut to 2025 guidance have raised execution concerns and prompted meaningful downward revisions to price targets.
Updated forecasts call for below consensus growth into 2026 and even potential negative sequential customer growth in Q4, pressuring SPS Commerce’s premium valuation and challenging the prior high growth narrative.
As the company transitions into a more mature phase with reduced long term growth expectations, several price target cuts reflect a reset in valuation multiples to better align with lower projected organic growth and sector peer compression.

What's in the News

The board has authorized a new share repurchase plan that allows SPS Commerce to buy back up to $100 million of its stock. The program will be funded by cash on hand and future cash flows and will run through December 1, 2027 (Key Developments).
From July 1, 2025 to September 30, 2025, the company repurchased 259,645 shares for $29.99 million, completing a total of 685,432 shares repurchased for $89.99 million under the buyback announced on July 25, 2024 (Key Developments).
Management reiterates an active M&A strategy and highlights ample capital to deploy into acquisitions that expand products, geography, or the customer base, provided targets meet business and financial return thresholds (Key Developments).
For Q4 2025, SPS Commerce provides guidance for revenue of $192.7 million to $194.7 million, implying 13% to 14% year over year growth, and net income per diluted share of $0.53 to $0.57 on 38.3 million diluted shares (Key Developments).
For full year 2025, the company expects revenue of $751.6 million to $753.6 million, about 18% growth over 2024, and EPS of $2.31 to $2.34 on 38.1 million diluted shares (Key Developments).

Valuation Changes

Fair Value: Unchanged at approximately $98 per share, indicating no material shift in intrinsic value estimates.
Discount Rate: Risen slightly from about 8.40% to 8.48%, reflecting a modest increase in the required return or perceived risk profile.
Revenue Growth: Effectively unchanged at around 8.1%, suggesting stable expectations for long term top line expansion.
Net Profit Margin: Essentially flat at roughly 15.4%, indicating no notable revision to long term profitability assumptions.
Future P/E: Increased marginally from about 32.6x to 32.7x, pointing to a slightly higher valuation multiple applied to forward earnings.

Strong demand for cloud-based solutions and effective integration of acquisitions are fueling recurring revenue growth and expanded customer opportunities.
Operational efficiencies and market leadership position the company for margin expansion and resilience despite macroeconomic headwinds.
Exposure to economic uncertainty, cautious U.S. supplier spending, price pressure from customer optimization, industry competition, and M&A integration risks could impact earnings growth and margins.

Catalysts

About SPS Commerce

Provides cloud-based supply chain management solutions in the United States.What are the underlying business or industry changes driving this perspective?

The accelerating digitalization of retail supply chains and rising compliance requirements are driving robust demand for SPS Commerce's cloud-based EDI and supply chain solutions, supporting sustained growth in new customer adds and recurring revenue.
As the complexity of omni-channel retail and need for real-time, integrated supply chain analytics increases, SPS Commerce is well positioned to expand its average revenue per user (ARPU) through expanded network connections and the cross-selling of high-value products like analytics and revenue recovery solutions.
The company's demonstrated ability to integrate recent acquisitions (SupplyPike, Carbon6) and quickly align go-to-market strategies is creating additional cross-sell and wallet share opportunities, enhancing both near-term revenue growth and long-term earnings potential.
Operational investments in onboarding automation and customer delivery efficiency-including application of generative AI-are driving margin expansion, with management guiding for continued adjusted EBITDA margin improvement of 2 percentage points annually through improved gross margin and operating leverage.
Despite current macro-related caution and delayed purchasing decisions among suppliers, SPS Commerce's network effects, high customer retention, and established market leadership position it to benefit disproportionately as supply chain investment cycles normalize, providing upside to both revenue growth and net margin resilience.

SPS Commerce Earnings and Revenue Growth

SPS Commerce Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming SPS Commerce's revenue will grow by 11.1% annually over the next 3 years.
Analysts assume that profit margins will increase from 11.8% today to 14.4% in 3 years time.
Analysts expect earnings to reach $139.1 million (and earnings per share of $3.37) by about September 2028, up from $82.9 million today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $119.1 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 53.0x on those 2028 earnings, up from 50.7x today. This future PE is greater than the current PE for the US Software industry at 36.2x.
Analysts expect the number of shares outstanding to grow by 0.91% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 8.4%, as per the Simply Wall St company report.

SPS Commerce Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Ongoing macroeconomic uncertainty-particularly surrounding tariffs and global trade-has caused heightened spend scrutiny, delayed purchasing decisions, longer deal cycles, and aggressive cost-cutting initiatives among supplier customers, which could reduce near-term and medium-term revenue growth and create volatility in earnings.
Heavy reliance on U.S.-based suppliers, who are exhibiting greater caution on technology spending compared to international customers, exposes SPS Commerce to regional economic downturns or sector-specific headwinds, potentially constraining revenue resilience and growth diversification.
Increasing customer scrutiny and effort to optimize or lower their SPS Commerce invoices-by reducing network connections, downsizing usage, or turning off services (especially discretionary analytics)-could drive ARPU (average revenue per user) pressure and slower incremental revenue expansion.
Persistent competition and the risk of industry commoditization, especially in cloud-based EDI services and supply chain analytics, may put downward pressure on pricing and gross margins, especially as SPS expands cross-sell motions and value-added service offerings.
There is a risk that the company's post-acquisition integration of recent M&A (such as Carbon6 and SupplyPike), while so far accretive, may fail to deliver anticipated cross-sell synergies or efficiencies, and any misexecution could dilute operating margin gains and depress medium-term earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $152.364 for SPS Commerce based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $170.0, and the most bearish reporting a price target of just $120.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $966.0 million, earnings will come to $139.1 million, and it would be trading on a PE ratio of 53.0x, assuming you use a discount rate of 8.4%.
Given the current share price of $111.04, the analyst price target of $152.36 is 27.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Recurring Revenue And Market Position Will Drive Potential Upside Into Year End