Goldman Sachs Upgrades Shopify On 'Significant' E-Commerce Opportunity

Accelerated e-commerce penetration is expected to provide a “sustained tailwind” to Shopify Inc’s SHOP gross merchandise value growth and merchant solutions revenue, according to Goldman Sachs.

The Shopify Analyst: Christopher Merwin upgraded Shopify from Neutral to Buy and maintained a $1,127 price target.

The Shopify Thesis: Following global lockdown orders to curtail the spread of COVID-19, e-commerce penetration in the U.S. grew from 16% of retail spending in the first quarter to 40% in May, Merwin said in the Tuesday upgrade note. (See his track record here.)

The internet team at Goldman Sachs has raised its 2020 growth estimates for U.S. e-commerce revenue from 15% to 29%, which is likely to continue boosting Shopify’s growth.

Shopify represented only 2.4% of the global e-commerce market in 2019 and has “significant opportunity” to grow its share of e-commerce sales over the next several years, the analyst said. 

Shopify caters to among the largest total addressable markets in software, estimated at $200 billion globally, he said.

The company will be able to “sustain hyper-growth for longer than the market expects,” given its “unique customer acquisition funnel” that has proved successful for both small and medium businesses as well as the enterprise segment, Merwin said. 

SHOP Price Action: Shares of Shopify were trading 2.84% higher at $1,004.16 at last check Tuesday.

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Photo courtesy of Shopify.