Brian Peterson Spotlights Greater Appreciation for Shopify Inc (US) (SHOP) Long-Term Growth Prospects After Management Meetings

The total addressable market opportunity for SHOP shines brightly ahead as Raymond James' Brian Peterson makes a bullish case for the Canadian e-commerce platform.


Raymond James analyst Brian Peterson is adding more fuel to his bullish fire on Shopify Inc (US) (NYSE:SHOP) on back of a meeting with the Canadian e-commerce platform’s management team at headquarters in Ottawa just last week. Not only does Peterson remain confident, he likewise has emerged with even more “appreciation” for SHOP’s long-term opportunity for growth ahead.

Believing that the total addressable market (TAM) opportunity is “understated,” the analyst maintains an Outperform rating on SHOP stock without suggesting a price target. (To watch Peterson’s track record, click here)

SHOP management forecasts a whopping $58 billion TAM, which indicates to Peterson “plenty of headroom” against the Street’s present revenue expectations for the year of $660 million. However, the analyst adds that “the TAM mostly reflects an SMB-oriented customer opportunity (merchants with <500 employees).”

Peterson asserts, “We view the recent success in Shopify Plus (including triple digit growth in MRR in 3Q17) as evidence that Shopify can scale well beyond SMB digital commerce solutions and thus makes this TAM projection look conservative. We also note that this reflects little monetization of SHOP’s wealth of business and digital commerce data, which can help facilitate additional revenue generating activities (we’ve already seen this with Shopify Capital). While the long-term picture remains bright, our partner conversations also remain quite positive, and we’d expect SHOP to report solid upside to 4Q17 results in late January or early February. Shares are definitely not inexpensive at 10x our 2018 revenue projection, although we believe solid upside to estimates will allow SHOP to sustain its valuation premium to the 30%+ growth group (which trades at ~7.5x sales).”

With over $1 billion sold through Shopify’s platform between Black Friday and Cyber Monday, Peterson sees strong strides forward in sustaining a gross merchandise volume (GMV) ramp in the fourth quarter, betting on high probability for short-term upside.

That being said, Wall Street traders should “brace” themselves for a rising seasonal dip in the first quarter turnout moving forward, as even this bullish anticipates a “reverse course” of seasonal tailwinds in the first quarter of 2018.

TipRanks illustrates a bullish Wall Street backdrop for Shopify, with 8 out of 11 analysts polled in the last 3 months rating a Buy on the tech player and 3 maintaining a Hold. The 12-month average price target stands at $113.75, marking 12% upside from where the stock is currently trading.  

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