This Top Analyst Sees Compelling Value in Shopify (SHOP) Stock
Shopify (NYSE:SHOP) investors reacted to the company’s second-quarter earnings report with some skittishness, sending shares down nearly 7% to in Tuesday’s trading session.
Indeed, Shopify revealed a slowdown in key metrics, conservative guidance for the fiscal year, and high costs in its efforts to shift from leading digital-commerce enabler to wide-ranging global platform for entrepreneurship, widening the company’s loss more than 70% in its most recent quarter.
However, Canaccord’s top analyst David Hynes remains bullish on SHOP stock, reiterating a Buy rating, while slightly raising the price target to $165 (from $160), which represents a potential upside of 15% from where the stock is currently trading.
Hynes commented, “Our advice on SHOP would be to not let today’s price action confuse you on the fundamentals. This was another solid quarter for Shopify as the firm grew its nearly $1 billion revenue run-rate at 62% in the quarter. For comparison’s sake, when Salesforce was the same size, that firm was growing just over 50%, but it was also delivering adjusted operating margins in the low teens. We guess that brings us to what could be a legitimate gripe on the print, which is that guidance suggests this year’s profit generation (as small as it may be) will be even more Q4-weigthed than we had thought. Any time that promises are pushed out toward the end of a year, it adds risk to a story, and risk is synonymous with stock price pressure – particularly for a high valuation name in a skittish tech tape.”
“The bottom line is that we don’t ascribe to the notion that growth is decelerating faster than expected or that merchant churn is going to sneak up and bite Shopify. That just doesn’t make sense,” the analyst concluded.
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst David Hynes has a yearly average return of 29.5% and a 73% success rate. Hynes is ranked #61 out of 4836 analysts.