Oppenheimer sees web, commerce software Q3 backdrop improving, AI worries linger

Investing.com reports that interest in web and e-commerce software companies has been on the rise ahead of their third-quarter results. However, concerns persist that artificial intelligence could negatively impact their businesses, according to Oppenheimer. The brokerage attributes this to a broader recent uptick in software, and suggests that interest in commerce software is expected to remain subdued until business results stabilize or improve.

Shopify is anticipated to deliver revenue growth between 2 and 3 percentage points above Wall Street's forecast of 31.6% for the third quarter. This optimism is based on strong consumer demand, according to Oppenheimer's discussions with buy-side firms. They also anticipate gross merchandise volume growth of around 32% to 33%, along with a free cash flow margin above 20% after stronger-than-expected second-quarter results. Oppenheimer has raised their price target on Shopify to $205 from $175.

Wix.com is projected to see bookings and revenue growth in line with forecasts of 10% and 12%, respectively. However, the brokerage warns that weaker demand from smaller designers and partners, as activity shifts towards AI tools like Base44, could delay a return to faster growth. Operating profit and free cash flow margins are expected to be 13% and 16%, respectively, following a workforce reduction of about 20% that was finalized in June.

GoDaddy is expected to report third-quarter bookings growth of 5.0%, aligning with forecasts, and revenue slightly above the forecast by 0.5 percentage point, with higher EBITDA than anticipated. While management has adjusted second-half growth in its A&C business to high single digits, it remains higher than the 10.4% forecast due to the company's efforts to direct customers to its Airo product to mitigate AI disruption.

The company's shares have been supported, in part, by a Financial Times report in late September that GoDaddy received a takeover offer from Gen Digital, as per Oppenheimer.

Commerce.com is forecast to report revenue in line with the $83.5 million estimate, with operating profit potentially $2 million to $3 million higher after a workforce reduction. The company has reduced its full-year revenue outlook midpoint by $18 million in the second quarter, citing a more cautious view of second-half new account bookings and softer B2C replatforming. Management has refuted that the restructuring indicates weaker demand, targeting annualized savings of $60 million to $80 million.