Shares of BigCommerce ( BIGC -2.81% ) sank on Thursday after the e-commerce software provider released its second-quarter results. Although it beat analysts’ expectations across the board, some red flags along with a high valuation gave investors plenty of reason to drive the stock down. Shares were down about 6.8% at 11:40 a.m. EDT today after falling as much as 12% earlier in the day.
BigCommerce reported second-quarter revenue of $36.3 million, up 33% year-over-year and about $700,000 above the average analyst estimate. Total annual revenue increased 32% to $151.8 million.
This revenue growth is largely driven by increased spending by existing users. For accounts with an annual contract value greater than $2,000, average revenue per account increased 29% in the second quarter. The number of such large accounts only increased by 7%, a sign that the company may be struggling to find new customers.
Adjusted earnings per share posted a loss of $0.38, better than a loss of $0.58 in the year-ago period and $0.05 better than analysts expected. Despite the slow pace of customer additions, BigCommerce spent about 46% of its revenue on sales and marketing.
For the third quarter, management expects to generate revenue between $35.9 million and $36.3 million, representing a slight sequential decline at the midpoint. For the full year, the company reported revenues between $142.5 million and $143.3 million. An adjusted operating loss is expected between $10.1 million and $10.4 million for the third quarter, and between $32.9 million and $33.5 million for 2020.
BigCommerce is now valued at around $5.75 billion, which puts the price-to-sales ratio based on company forecasts at 40. Given the average revenue growth rate (at least in the stock world of software as a service) and the fact that the customer base is growing at an average rate, it is difficult to justify such a high valuation.
The company should be well positioned to benefit from the accelerated transition to e-commerce driven by the pandemic. Unfortunately for investors, its second quarter results left much to be desired.
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