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Based in Morrisville, NC, ChannelAdvisor (NYSE:ECOM) scheduled a $74 million IPO with a market capitalization of $266 million at a price range mid-point of $13, for Thursday, May 23, 2013.

Five other new IPOs are scheduled for IPOs for this week. The full IPO calendar is here.

  • S-1A filed May 9, 2013
  • Manager, Joint Managers: Goldman; Stifel
  • Co- Managers: Pacific Crest Securities; BMO Capital Markets; Needham; Raymond James

SUMMARY

ECOM is a Business-to-Business and a Business-to-Consumer software-as-a-service (SAAS) company. For the March 2013 quarter revenue was up 25% to $15 million, and losses increased to 18% of revenue ($3 million) from 7% of revenue ($1 million). 65% of revenue comes from fixed subscription fees plus implementation fees.

VALUATION

ECOM is priced in the same range as E2Open (NASDAQ:EOPN). EOPN IPO'd July 25, 2012 at $15. It traded recently $15.34. However, EOPN's March 2013 revenue was flat compared to March 2012.

Given ECOM's better internal growth rate of 25% in top line revenue, ECOM is a better value.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualizing March qtr

Cap (MM)

Sales

Earnings

BkValue

TangibleBV

in IPO

ChannelAdvisor

$267

4.4

-24.7

3.3

4.2

28%

E2open

$273

3.9

-24.4

14.4

14.4

Glossary

ECOM has an accumulated deficit of $82 million.

CONCLUSION

Buy ECOM on its IPO.

To put the above conclusions and observations in context, the following is reorganized , edited and summarized from the full S-1 referenced above.

BUSINESS

ECOM is a Business-to-Business and a Business-to-Consumer software-as-a-service company. ECOM believes it is a leading provider SaaS, solutions that enable retailer and manufacturer customers to integrate, manage and optimize their merchandise sales across hundreds of online channels.

ECOM believes it enables customers to connect with new and existing sources of demand for their products, including e-commerce marketplaces, such as eBay (NASDAQ:EBAY), Amazon (NASDAQ:AMZN) and Newegg, search engines and comparison shopping websites, such as Google (NASDAQ:GOOG), Microsoft's (NASDAQ:MSFT) Bing, and Nextag, and emerging channels, such as Facebook (NASDAQ:FB) and Groupon (NASDAQ:GRPN).

ECOM's suite of solutions is accessed through a standard web browser, provides customers with a single, integrated user interface to manage their product listings, inventory availability, pricing optimization, search terms, data analytics and other critical functions across these channels.

ECOM's proprietary cloud-based technology platform delivers significant breadth, scalability and flexibility to its customers. In 2012, customers processed over $3.5 billion in gross merchandise value, or GMV, through ECOM's platform. As of March 31, 2013, customers managed over 100 million stock-keeping units, or SKUs, of their inventory on ECOM's platform.

CUSTOMERS

ECOM serves customers across a wide range of industries and geographies. As of March 31, 2013, ECOM had nearly 2,000 customers worldwide, including 27% of the top 500 U.S. Internet retailers, as ranked by Internet Retailer magazine based on 2012 sales, up from 16% of the top 500 U.S. Internet retailers, based on 2007 sales, as of December 31, 2007.

Customers include both traditional and online retailers, such as Ann Taylor, eBags.com, J&R Electronics and Jos. A. Bank Clothiers (NASDAQ:JOSB), as well as manufacturers of consumer goods, such as Dell (NASDAQ:DELL), Dooney and Bourke, Lenovo (OTCPK:LNVGF), Sony (NYSE:SNE) and Under Armour (NYSE:UA).

REVENUE SOURCES

ECOM derives revenue primarily from subscription fees paid by customers for access to cloud-based solutions. Contracts include both a fixed subscription fee and a variable subscription fee that allows ECOM to participate in a share of customers' GMV processed through ECOM's platform.

MARKET GROWTH

According to Forrester Research, Inc., an industry research firm, e-commerce consumer spending in the United States, Europe, Asia-Pacific and Latin America is expected to increase from $534 billion in 2011 to $1.1 trillion in 2016, a compound annual growth rate of 15%.

INTELLECTUAL PROPERTY

Some of ECOM's technology relies upon third-party licensed intellectual property. ECOM has two patent applications pending in the United States and one patent application pending in Brazil.

COMPETITION

Several competitors provide solutions that compete with some of the capabilities of ECOM's platform, including those who provide software or services to connect retailers and manufacturers with one or more online channels. ECOM also competes with in-house solutions used by retailers and manufacturers that elect to build and maintain their own proprietary integrations to online channels.

In addition, ECOM competes with the channels themselves, which typically offer software tools, often for free, allowing retailers and manufacturers to connect to them.

An IPO from last summer is in the same broadly defined market segment, E2open. EOPN IPO'd July 25, 2012 at $15. It traded recently below at $15.20. EOPN supports operational business processes of its customers and their trading partners, including supply chain management, procurement, sales and finance functions.

USE OF PROCEEDS

ECOM expects to net $66 million from its IPO. IPO funds are allocated to working capital and general corporate purposes.

Disclaimer: This ECOM IPO report is based on a reading and analysis of ECOM's S-1A filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: ChannelAdvisor