We came across a bullish thesis on VTEX (VTEX) on Substack by Jimmy. In this article, we will summarize the bulls’ thesis on VTEX. VTEX (VTEX)’s share was trading at $6.17 as of Jan 21st. VTEX’s trailing and forward P/E were 131.28 and 75.19 respectively according to Yahoo Finance.
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VTEX, founded in 2000 by Geraldo Thomaz and Mariano Gomide, initially began as a marketplace for the textile industry but pivoted to ecommerce development after the collapse of the internet bubble. The company’s breakthrough came in 2007 when it secured a contract to develop Walmart’s Brazilian website, outshining competitors and establishing itself as a serious player in the ecommerce space. Over time, VTEX’s platform evolved into a leading provider of enterprise ecommerce solutions, particularly in Latin America, where the company now commands a dominant 35% market share in Brazil’s enterprise ecommerce sector.
With the global ecommerce market projected to grow from $5.8 trillion in 2023 to $8 trillion by 2027, VTEX is well-positioned to capitalize on this growth, especially within Latin America, which saw ecommerce reach $145 billion in 2023. The company’s $18.2 billion GMV and stronghold in Brazil, which accounts for half of its revenue, allow VTEX to leverage expanding ecommerce trends across the region. VTEX offers a comprehensive suite of ecommerce solutions, including online store creation, omnichannel order management, and third-party marketplace integration. The company serves over 2,600 clients globally, including major brands like Sony, Nike, Unilever, and Nestlé, further proving its platform’s scalability and robust performance.
VTEX’s business model is designed for scalability, with a predictable revenue stream from fixed subscription fees and a take-rate on client GMV, which averages 0.9%. This tiered pricing model aligns the company’s interests with those of its clients, ensuring long-term relationships and minimizing churn. Its “all-you-can-eat” pricing structure further strengthens this relationship by offering clients unlimited access to platform functionalities, driving incremental GMV growth and increasing VTEX’s take-rate revenue. This approach has proven successful, as 82% of the company’s revenue comes from clients with over a year’s tenure, with churn rates consistently remaining low.
The company’s strategic positioning as a comprehensive digital commerce ecosystem provider reinforces its competitive advantage, as it continues to enhance its platform and foster customer loyalty. VTEX’s ability to scale its platform while offering low-code, API-first solutions allows clients to customize functionalities without disrupting core operations. This flexibility has made VTEX a leader in the B2C digital commerce space, outpacing competitors like Shopify and commercetools in key growth markets.
With the global ecommerce market expected to grow at a 12.5% CAGR, VTEX’s projected GMV by 2028 is $35 billion, reflecting its potential to capture significant market share. The company’s expected margin improvements, driven by EBITDA expansion, position it to achieve a 25% EBITDA margin by 2028. At a projected exit P/E multiple of 30x, VTEX could reach a $2.3 billion market cap, implying a target price of $12.5 per share—representing a 110% upside or a 21% annualized return. This projected growth, combined with VTEX’s operational efficiency, scalability, and innovative technology, makes the company an attractive investment opportunity. Despite risks like technological adaptation and currency exposure, VTEX’s position in the competitive ecommerce landscape offers substantial upside for long-term investors. Currently undervalued relative to peers like Shopify, VTEX’s strong foothold in Latin America and its scalable, customer-centric business model underscore its growth potential, making it a compelling play for those looking to capitalize on the ecommerce market’s expansion.
VTEX (VTEX) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 11 hedge fund portfolios held VTEX at the end of the third quarter which was 14 in the previous quarter. While we acknowledge the risk and potential of VTEX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than VTEX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.