Shopify Has Competitive Moat That Warrants Premium Valuation: JP Morgan Analyst

JP Morgan analyst Reginald Smith initiated coverage on Shopify Inc SHOP with an Overweight rating and a price target of $74.

As per Smith, Shopify is one of the largest publicly traded payment facilitators with a solid competitive moat that warrants a premium valuation.

According to the analyst, Shopify's product breadth, ease of use, and scale are distinct competitive advantages that will continue to fuel industry-leading growth.

Smith modeled 18% compounded revenue growth through fiscal 2026 as Shopify benefits from the secular shift toward e-commerce and scales growth initiatives.

The recent pullback creates an attractive entry opportunity for new investors.  

Smith sized Shopify's global serviceable e-commerce GMV opportunity ex China, Amazon.Com Inc AMZN, Apple Inc AAPL, and Walmart Inc WMT at $1.9 trillion, which translates into a nearly $60 billion serviceable revenue opportunity (growing high-single digits). It suggests Shopify is just 11% penetrated within its serviceable market.

The analyst estimated that every point of share could be worth nearly $600 million in annualized revenue.

Moreover, he estimated that offline retail could be an incremental $60 – $90 billion opportunity globally.  

Smith said Shopify's R&D investment dwarfs peers', culminating in an unrivaled array of features and capabilities that keep the company on the cutting edge.

Moreover, the analyst noted an opportunity to "price for value," especially for enterprise clients, and estimated that every $100 increase in monthly fees for existing Shopify Plus merchants could be worth $30 million in annualized revenue and profit.

Finally, Smith noted Shopify could narrow its margin gap to similarly sized SaaS businesses (a $300 million annual EBITDA opportunity) by leveraging AI (and other efficiencies) while preserving its "crafter's paradise" culture.

SHOP Price Action: Shopify shares traded higher by 2.44% at $64.55 at the last check on Tuesday.

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