William Blair analyst Justin Furby initiates coverage on shares of Shopify Inc (US) (NYSE:SHOP) with a Market Perform rating. While the analyst sees the e-commerce software maker reaching $60 billion in gross merchandise value (GMV) in 2020, Furby believes upside in the stock may be limited at the current valuation. (To watch Furby track record click here.)
Furby wrote, “Merchants on Shopify’s platform generated $15.4 billion of gross merchandise value (GMV) in 2016, nearly double from 2015 and putting its collective base of SMB merchants in the category with the e-commerce business of Walmart, but still just a fraction of the roughly $2.0 trillion global e-commerce market. We see a path to $60 billion-plus in GMV by 2020 (41% compound annual growth), and believe the company’s large addressable market, coupled with its recent push upmarket and successful cross-selling of products such as payments and POS, provides it with runway to drive revenue growth of 35%-plus over the next three to ϐive years—while expanding margins.”
However, “Shopify trades at a premium revenue multiple to its comp group, and although its growth rate and secular trends are arguably unmatched in the SaaS universe, ifwe see a market correction or investors become uncomfortable with a revenue valuation framework, shares could face meaningful pressure,”
Overall, out of the 22 analysts polled by TipRanks, in the past 3 months, 13 rate Shopify Inc. stock a Buy, while 9 rate the stock a Hold. With a downside potential of 15.3%, the stock’s consensus target price stands at $77.32.