ChannelAdvisor shares surge after earnings report

dranii@newsobserver.comAugust 12, 2013 

ChannelAdvisor shares have been on a roll since the e-commerce software company reported better-than-expected quarterly results last week.

Shares of the Morrisville company closed Monday at $28.04, up $3.04. Shares have surged 41 percent since the company reported after the markets closed Wednesday that its second-quarter revenue was higher and its net loss was lower than analysts were anticipating.

Investors who paid $14 a share when the company launched its initial public offering in May have seen the value of their holdings double.

The jump has outpaced what some optimistic analysts were expecting after the quarterly results were released. Raymond James analyst Terry Tillman, who rates the stock “outperform,” raised his 52-week target price to $23 a share last week. Likewise, analyst Karl Keirstad of BMO Capital Markets bumped his target price to $24 from $21 previously.

“The company offers investors an attractive growth acceleration story,” Tillman wrote in a research note.

ChannelAdvisor added a record 138 business customers in the quarter, boosting its total to 2,135 and helping the company post a 29 percent jump in revenue to $16 million. Among the customers it added were Emerson Electric, KitchenAid and Sony Australia.

Businesses use the company’s software to integrate and manage their online sales across a multitude of sales channels, including marketplaces such as Amazon and eBay and comparison shopping sites such as Nextag. Companies also use its software to automatically advertise products on search engines such as Google and Yahoo and to promote products on Facebook.

ChannelAdvisor executives talked up the company’s prospects during its earnings conference call.

“We believe we’ve established ChannelAdvisor as a leader in a large, underserved market that is still ... in its very early days,” said CEO Scot Wingo, who noted that the company has about a 2 percent market share.

The company’s growth opportunities include e-commerce outside of North America, which accounts for just 21 percent of its revenue but represents about half of the e-commerce market; and mobile e-commerce, which is enjoying a 39 percent compound annual growth rate. ChannelAdvisor recently opened a Hong Kong office to expand its presence in China.

ChannelAdvisor lost $4.5 million in the second quarter, up from a year ago but better than the $6.4 million loss that analysts were expecting. The company is eschewing profitability in the short-term as it aggressively expands its sales force, which has doubled in size since the beginning of 2012, according to Tillman.

“Because of the rapid growth in our sales team, roughly half of our sales team has been with us for less than a year,” said David Spitz, president and chief operating officer. “In our experience, it takes about a year for reps to reach full productivity. So, we believe we will continue to see gains from our sales investments as our newer reps mature and gain tenure in our organization.”

The company expects revenue for all of 2013 will range from $66.1 million to $66.7 million, up from $53.6 million last year.

Ranii: 919-829-4877

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