BigCommerce's Up Market Shift Likely To Boost Bottomline, Analyst Says

Needham analyst Scott Berg maintained a Buy rating on BigCommerce Holdings, Inc BIGC, with a price target of $20.00.
Berg hosted investor meetings with BigCommerce SVP of Finance and IR Daniel Lentz yesterday and was more confident that the company's recent GTM shift upmarket is a long-term winning strategy.
2023 is an operating leverage year, and management anticipates breakeven profitability by mid-2024.
Also Read: BigCommerce's Strong Black Friday And Thanksgiving Sales Data Impresses Analysts
While 2022 was an investment year for BIGC, management noted that 2023 would likely see positive operating leverage.
They also discussed their previously announced target of breakeven adjusted EBITDA by mid-2024, which assumes no change in the existing macro environment.
BigCommerce had much better unit economics, with customers selecting a higher product tier.
BigCommerse has an LTV: CAC ratio of 8:1 for Enterprise accounts versus 2:1 for non-Enterprise accounts.
The analyst foresees the company's operating model gaining meaningful leverage in FY23 from this pivot and achieving its stated mid-2024 breakeven Adjusted EBITDA target.
Gross cash likely troughs near $200 million, but Berg believes that target is beatable.
Given its focus on driving operational leverage from its significant GTM investments in 2022, the company believes its gross cash level will trough at no worse than $200 million.
After a big GTM investment year, the company's cash burn has been in focus, especially given the market's current focus on profitability.
Berg believes upside exists in management's expectations of another $100 million negative FCF before reaching profitability.
The poor macro also pressured deal volume but not win rates.
Price Action: BIGC shares traded lower by 1.29% at $9.15 on the last check Tuesday.

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