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.