It’s one small step forward for Shopify (SHOP), one giant leap for the company’s stock rating. RBC’s top-ranked analyst Ross MacMillan upgraded SHOP stock from Sector Perform to Outperform, while boosting the price target to $230 (from $180). The new target is roughly 35% above where the stock is currently trading.
According to TipRanks, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Ross MacMillan has a yearly average return of 31% and a 87% success rate. MacMillan has a 102.6% average return when recommending SHOP, and is ranked #2 out of 5152 analysts.
The long-term value prop here is quite compelling, says MacMillan. The analyst believes Shopify is becoming the de-facto standard for independent merchants selling online, while breaking away from other platform vendors.
MacMillan noted, “Our upgrade reflects a number of tactical factors including: i) We expect a return of net new merchant growth this year driven by the international opportunity, while our model embeds tougher CAC and churn appears to be moderating following explosive aspirational merchant growth in CY17 that weighed on CY18. ii) We think our assumptions on take rates remain conservative, including moderating Gross Payment Volumes/ Gross Merchant Volumes as well as significant deceleration in non-payment Merchant Solutions revenue. iii) We remain prudent on GMV growth/ average merchant, despite sales for merchants on the platform for 12M+ growing at 24% Y/Y TTM […] In addition, the key bear-case on churn has been digested and appears to be moderating.”
MacMillan’s upgrade comes after Shopify posted better-than-expected Q4 results — revenues of $343.86 million topped consensus estimates of $327.63 million. However, the company’s guidance for adjusted operating income was in the range of $10-$20 million, which is below the $57 million analysts collectively were expecting.
All in all, most analysts on Wall Streets are out rooting for this e-commerce player to be a winning stock pick, as TipRanks analytics showcase SHOP as a Buy. Based on 22 analysts polled by in the last 3 months, 16 rate a Buy on Shopify stock while 6 maintain a Hold. The 12-month average price target stands at $190.32, marking a nearly 11% upside from where the stock is currently trading. (See SHOP’s price targets and analyst ratings on TipRanks)