Wells Fargo Is Bullish On Shopify

Shopify Inc SHOP gives investors a good way to get in on growth in online commerce, particularly as smaller businesses start to build digital platforms, Wells Fargo says.

The Analyst

Timothy Willi initiated coverage of Shopify with an Outperform rating and a $175 price target.

The Thesis

Willi said Shopify has a “clear path to profitability” over the next two to three years.

“We believe SHOP is well positioned to benefit from the strong secular shift to digital and omni-channel commerce, particularly among small and midsize businesses on a global basis,” Willi said in the note. “Digital commerce is expected to show strong growth for the foreseeable future and while much of the growth has been driven by large retailers, there is a growing movement by (small and mid-sized businesses) and new brands to build digital commerce platforms.”

Wells Fargo estimates Shopify will see earnings per share of 81 cents in 2019, up from a projected 33 cents in 2018.

Other reasons cited include:

• Strong growth in international markets.
• Growth of the Shopify Plus platform aimed at larger retailers.
• Margin expansion as SHOP drives scale across its operating platform.
• Attractive valuation.

Price Action

Shopify shares were up 3.9 percent at $134.55 at time of publication Tuesday afternoon.

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