DA Davidson Downgrades CommerceHub Following Buyout
CommerceHub Inc (NASDAQ: CHUBA), a distributed e-commerce network for retailers and brands, announced Tuesday morning open an agreement to be bought by private-equity firms GTCR and Sycamore Partners for $1.1 billion in cash.
Reacting to the announcement, the stock settled Tuesday's session up about 23 percent at $22.50.
The Analyst
DA Davidson analyst Tom Forte downgraded CommerceHub from Buy to Neutral.
The Thesis
The CommerceHub buyout is a reflection of the significant cash flow the company generates on revenues, Forte said in a note. The deal is due to close in the third quarter of 2018.
"We also see durability in its cash flows as there is a large and growing need for its services among traditional retailers – to increase their assortments by leveraging CommerceHub's large network of drop shipment vendors to more effectively compete against Amazon.com, Inc. (NASDAQ: AMZN)," the analyst said.
Considering DA Davidson's $23 price target, the per-share take-out price of $22.75 seems appropriate, prompting the downgrade, the analyst said.
If the acquisition doesn't go through, DA Davidson sees three potential catalysts over the next 12 months.
New client wins, internationally and for grocery;
Monetization from new client wins; and
Better-than-expected sales due to the secular shift of e-commerce and the implementation of drop shipments strategies to increase virtual inventories.
The Price Action
CommerceHub shares were up about 10 percent over the past year.
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Latest Ratings for CHUBA
Mar 2018 | DA Davidson | Downgrades | Buy | Neutral |
Oct 2017 | Dougherty | Initiates Coverage On | Buy | |
Sep 2017 | DA Davidson | Initiates Coverage On | Buy |
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