Market Overview

DA Davidson Downgrades CommerceHub Following Buyout

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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, 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 2018DA DavidsonDowngradesBuyNeutral
Oct 2017DoughertyInitiates Coverage OnBuy
Sep 2017DA DavidsonInitiates Coverage OnBuy

View More Analyst Ratings for CHUBA
View the Latest Analyst Ratings

Posted-In: DA Davidson Tom ForteAnalyst Color Downgrades Analyst Ratings


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AMTDMorgan StanleyUpgrades65.0
APOMorgan StanleyDowngrades34.0
CGMorgan StanleyDowngrades23.0
EIXEdward JonesDowngrades0.0
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