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VTEX Stock Declines 7% in a Month: Should Investors Buy the Dip?

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VTEX (VTEX - Free Report) shares have declined 6.9% in the past month, outperforming the Zacks Computer & Technology sector and the Zacks Internet Software industry. While the sector has dropped 2.5%, the industry has returned 1.5% over the same time frame.

The dip can be attributed to a challenging macroeconomic environment that negatively impacted top-line growth. In the first half of 2024, Gross Merchandise Volume (GMV) grew 19.8% on a year-over-year adjusted for forex, slower than the 20.9% reported in the same year-ago period. Revenue growth of 21.7% also slowed down from 22.5% reported in the same year-ago period.

However, non-GAAP gross subscriptions expanded 310 basis points over the same year-ago period to 77.7% in the first half of 2024. VTEX also reported operating profit of 105K in the same period. It has been benefiting from cost optimization initiatives and a disciplined approach to expenses. 

On a trailing 12-month basis, VTEX shares have returned 40.2%, and the momentum is expected to continue in the second half of 2024. It has also outperformed its industry peers like Fortinet (FTNT - Free Report) and Aspen Technology (AZPN - Free Report) , shares of which have returned 25.8% and 16.4%, respectively.

VTEX Outperforms Sector in the Past Year

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Let’s dig deeper to find out the factors driving VTEX’s prospects.

VTEX’s Prospects Rides on Expanding Clientele


VTEX offers a software-as-a-service digital commerce platform for enterprise brands and retailers. It benefits from an accelerating e-commerce sale globally, which is anticipated to hit $8 trillion in 2027.

VTEX generates 86% of annual recurring revenues from enterprise customers. It generates more than 40% of GMV from Collaborative Commerce transactions and more than 80% of GMV from Collaborative Commerce integrations. 

VTEX’s expanding clientele bodes well for its prospects. At the end of 2023, it had 2.6K number of customers and 3.5K number of active online stores. More than 28,500 monthly active users access the VTEX developer portal.

Expanding international footprint, including a presence in countries like Australia, Brazil, Chile, Colombia, Mexico and Portugal, is noteworthy. VTEX has active online stores in 43 countries.

VTEX’s growing footprint in South America (Latin America) is positive, as it saw a 29% CAGR between 2019 and 2023. The Latin American e-commerce market was $145 billion.

A rich partner base that includes TikTok and Pinterest (PINS - Free Report) is noteworthy. The TikTok partnership has helped VTEX expand in Latin America. The Pinterest partnership now helps VTEX reach more than 500 million monthly active users.

VTEX’s Q3 & 2024 Guidance Encouraging

VTEX expects third-quarter 2024 revenues between $56 million and $57 million, suggesting an improvement in the range of 18-20% year over year on a forex-neutral basis.

The Zacks Consensus Estimate for third-quarter revenues is pegged at $57.08 million, indicating year-over-year growth of 12.73%. 

The consensus mark for third-quarter 2024 earnings is pegged at 2 cents per share, up a couple of cents over the past 30 days. VTEX reported a loss of a penny in the year-ago quarter.
 

VTEX Price and Consensus

VTEX Price and Consensus

VTEX price-consensus-chart | VTEX Quote

 

For 2024, VTEX expects revenues to be $231-$235 million, which suggests a rise of 18-20% year over year on a forex-neutral basis.

The consensus mark for 2024 revenues is pegged at $233.92 million, suggesting growth of 16.08% over the 2023 reported figure.

The Zacks Consensus Estimate for 2024 earnings is pegged at 6 cents per share, up a couple of cents over the past 30 days. VTEX reported a loss of 7 cents in the year-ago quarter.

The company raised its free cash flow and non-GAAP operating margins target to range from high single digits to low teens.

VTEX’s Strong Prospects Justify Premium Valuation

However, VTEX stock is not so cheap, as the Value Score of F suggests a stretched valuation at this moment.

In terms of the forward 12-month Price/Sales ratio, VTEX is trading at 5.03X, higher than the broader sector’s 2.58X.

Price/Sales Ratio (F12M)

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Nevertheless, we believe the strong growth prospect justifies VTEX’s premium valuation.

Is VTEX Stock a Buy?

VTEX shares are trading above the 50-day moving average, indicating a bullish trend.

VTEX Trades Above 50-day SMA

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

VTEX has been named as the Leader by market research firm IDC among 25 B2C vendors that include the likes of Shopify. The Growth Style Score of B makes the stock attractive for growth-oriented investors. 

VTEX currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.


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