Shopify Inc (US) (SHOP): What Keeps Oppenheimer on the Sidelines?

SHOP is one of the most expensive stocks in the sector, says Oppenheimer's Koji Ikeda.


Shopify Inc (US) (NYSE:SHOP) reported better-than-expected fourth-quarter earnings, as its revenue jumped 71% compared with a year ago. However, that failed to budge Oppenheimer analyst Koji Ikeda, which reiterates a Market Perform rating on SHOP stock. Why? Let’s take a look:

“Shopify delivered strong 4Q:2017 results and a solid growth outlook. The business momentum remains solid with 60%+ growth across leading growth indicators (MRR, Plus-MRR, GMV, total/subscription/merchant revenues, billings) that are data-points that Shopify’s positioning as a strategic vendor in SMB commerce is strengthening. On balance, management guided operating margins to essentially be breakeven in 2018, as the business reinvests the upside for growth (international, plus, core-platform), but also reverses the margin-expansion trend, which may pressure shares in the near term. Bottom line, Shopify’s growth is top-of-SaaS-class and the business is successfully disrupting the digital commerce opportunity, we think. However, SHOP is one of the most expensive stocks in software, by our analysis, and we patiently wait on the sidelines for a better entry point,” Ikeda wrote

According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Koji Ikeda has a yearly average return of 28.9% and a 86% success rate. Ikeda is ranked #816 out of 4753 analysts.

If we step back and look at the bigger picture, we can see that overall SHOP stock has a Buy analyst consensus rating. In the last three months, the stock has received 6 Buy and 3 Hold ratings. However,  with a downside potential of nearly 7%, the stock’s consensus target price stands at $128.63.

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