WeCommerce Holdings Ltd.
(WE-V) C$11.50
Q2/21 Preview: Expecting Strong Contribution from Acquisitions
Event
Q2/F21 Results: Thursday, August 26, 2021, after markets close. Conference Call: 5:00 p.m. ET. Registration link.
Impact: NEUTRAL
We forecast total revenue of $9.3mm, up 81% y/y. We expect recurring subscription revenue of $5.7mm, up 303% y/y, or 61% of total revenue mix this quarter. Our recurring subscription revenue forecast includes $4.3mm of revenue contribution from Stamped and Foursixty. We also expect digital goods revenue of $2.1mm, down 15% y/y, and Agency service revenue of $1.5mm, up 20% y/y. We expect $3.8mm of EBITDA, or 40.4% EBITDA margin.
Ecommerce backdrop remains strong, despite reopening in the quarter.
According to the U.S. Census Bureau, the U.S. retail ecommerce market grew 9% y/y in Q2, despite a very tough y/y comparable. The strength in ecommerce was also reflected in Shopify's gross merchandise volume (GMV), which grew 40% y/y in Q2/21. We estimate Shopify's Apps, Themes, and Domains revenue grew 107% y/ y in the quarter, suggesting continued strength in demand for WeCommerce's apps and themes portfolio.
Shopify's Apps ecosystem continues to grow. Shopify's Apps ecosystem grew to 7,000, up from 4,600 y/y, or 6,600 q/q. As Shopify's ecosystem continues to expand, so does the number of WeCommerce's potential acquisition targets. We believe that the recent apps and themes developments announced during Shopify Unite in June could further accelerate Shopify's apps and themes ecosystem growth. Moreover, the recent changes in pricing cap and commission rates in apps and themes reflect positively on WeCommerce. WeCommerce also continued to demonstrate its ability to source and complete compelling acquisitions with Archetype Themes. We estimate that Archetype could add C$8.2mm of revenue and C$5.3mm of EBITDA in the NTM, as well as potentially increase our target price to C$25 if we maintain our target multiples. However, the ecommerce peer group's NTM EV/Revenue multiple has contracted by ~2.5x since we last updated our estimates. We will add Archetype estimates to our model after we get additional colour during the earnings call this Thursday.
TD Investment Conclusion
We maintain our BUY rating and C$22.00 target price. The stock continues to trade well below its eCommerce peers despite the company's strong expected growth and margin.