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Why ChannelAdvisor Stock Skyrocketed Today

By Jon Quast – Jul 24, 2020 at 11:49AM

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The company reported strong preliminary results and is acquiring another player.

What happened

Shares of ChannelAdvisor (ECOM 0.33%) skyrocketed higher on Friday morning, up 33% as of 11 a.m. EDT, after the e-commerce cloud-technology company supplied investors with a pair of positive press releases.

ChannelAdvisor provided preliminary results for the second quarter of 2020, and they exceeded previous guidance. Furthermore, the company is acquiring an analytics firm called BlueBoard. 

A man holds a device displaying a holographic image of a rising stock chart.

Image source: Getty Images.

So what

ChannelAdvisor helps brands with e-commerce, by providing sales data, fulfillment optimization, and analytics. In Q2, the company generated revenue of $37.3 million. Not only was this good for 17% year-over-year growth, it was also 15% higher than previous guidance of $32.5 million.

Since these are preliminary results, not all financial metrics were provided. Excluded from the report were net earnings according to generally accepted accounting principles (GAAP). However, ChannelAdvisor did provide the non-GAAP measure of adjusted EBITDA. Its adjusted EBITDA was $11.4 million -- a whopping 90% higher than its previous guidance of $6 million.

ChannelAdvisor is also acquiring BlueBoard, a company headquartered in Paris offering e-commerce solutions similar to those offered by ChannelAdvisor. The price tag wasn't disclosed. But CEO David Spitz said the deal grows the company's "analytics capabilities to help brands succeed in an increasingly competitive e-commerce environment."

Investors sure like the sound of that. ChannelAdvisor stock has more than doubled in 2020 on bullish sentiment.

ECOM Chart

ECOM data by YCharts.

Now what

In the first quarter of 2020, ChannelAdvisor reported a GAAP profit of $2 million and adjusted EBITDA of $6.5 million. Since adjusted EBITDA is so much higher in Q2, I'd watch the company's net income when it releases full results on Aug. 6. If it can maintain growing profitability, that's undeniably a good thing for shareholders. If not, I'd look for why bottom-line growth has stalled. It's not always a bad thing.

Considering ChannelAdvisor serves an interesting niche, with growing revenue and a growing cash pile ($56 million in March), this small-cap stock is one for investors to watch.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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