Analyst Raises Shopify's EBIT Forecasts, Sees Strong Growth Potential With Flexport Deal

KeyBanc analyst Josh Beck reiterated an Overweight rating on the shares of Shopify Inc. SHOP, increasing the price target to $65 from $55.
The recently-inked Flexport deal is likely to sharpen the core focus and boost merchant fulfillment options of Shopify, the analyst notes. The agreement includes the sale of Shopify's core logistics assets - Deliverr.
Management announced Shopify would sell Deliverr to Flexport in return for a ~13% equity stake and merchant referral fees. The company expects the acquisition to close in 2Q23.
This apart, the analyst believes Shopify's cloud-based, mobile-centric platform is well-positioned to capitalize on the m-com wave, given an impressive innovation velocity and vibrant partner ecosystem.
The company is expected to benefit from increased payment penetration increases in non-core geographies, which is likely to propel Merchant Solutions revenue growth, Josh notes.
For 2023 KeyBanc raised Shopify's EBIT to $305 million vs. an earlier forecast of a loss of $70 million.
For 2024, EBIT is expected to be $450 million, vs. an earlier estimation of a $79 million loss.
The analyst expects gross merchandise volume to be $53.5 billion (up HSD q/q, similar to last year's seasonality).
Price Action: SHOP shares traded higher by 7.66% at $61.69 on the last check Monday.