The commerce software stocks to own in 2024, according to Piper Sandler

2023 was another challenging year for Commerce Tech, but looking to 2024, Piper Sandler sees an opportunity for positive growth revisions in higher quality names without losing progress on profitability. The firm’s top ideas to own in 2024 are Shift4 Payments (FOUR), GoDaddy (GDDY), and Wix.com (WIX).

2024 OUTLOOK: 2023 was another challenging year for Commerce Tech. Ex-Shopify (SHOP), the group on average underperformed the Nasdaq for the third year in a row, despite strong performance from sub-cohorts like e-commerce which returned 58% on average, Piper notes.  Looking ahead to 2024, the firm sees an opportunity for positive growth revisions in its higher quality names without losing progress on profitability. Piper’s top ideas to own in 2024 are Shift4 Payments, Wix.com, and GoDaddy.

TOP PICKS FOR 2024: The firm believes Shift4 Payments has an attractive trajectory with increasing penetration with larger merchants, continued vertical expansion, and remaining monetization potential via conversion on Gateway volumes. In 2024, Piper sees the potential for the company to generate over 30% organic GRLNF growth, while improving on the Q4 exit rate of 48% EBITDA margins. The firm raised its price target for Shift4 Payments to $93 from $85, keeping an Overweight rating on the shares.

Piper upgraded GoDaddy to Overweight from Neutral with a price target of $121, up from $100. Compression to mid-single-digit growth was the primary reason for the firm’s downgrade last year. Now with margins playing out quickly enough to position GoDaddy for a 29% NEBITDA margin exit rate in 2023 and 8% Domains bookings growth in last quarter, Piper is at a place where it can “really believe” in a reacceleration to high-single-digit growth in 2024 with 30%-plus NEBITDA margin. This could finally reverse a 5-year trend of multiple compression at GoDaddy.

Lastly, the firm raised its price target for Overweight-rated Wix.com to $146 from $130. Piper says it is closely monitoring the self-creator business for non-pricing related growth improvement, which has been on a slower path to double-digit growth than it anticipated. Nonetheless, Wix’s emphasis on profitability over the past year puts the company within reach of significant free cash flow/share improvement in 2024 and beyond. Guided to exiting the 2023 at 20% adjusted free cash flow margin, the firm sees free cash flow doubling over the next two years to $500M by 2025.

OTHER RATING, TARGET CHANGES: Piper Sandler also downgraded Semrush (SEMR) to Neutral from Overweight with a price target of $14, up from $12. The firm says that the 55% move since October leaves a more balanced risk-reward. Net new ARR trends in the second half of 2023 could point to strength in 2024, but multiple expansion beyond 5-times sales is more limited in Piper’s view.

The firm also raised its price targets for Neutral-rated Lightspeed Commerce (LSPD) to $20 from $18, Neutral-rated Toast (TOST) to $18 from $17, and Overweight-rated Vtex (VTEX) to $9 from $7.