- Oppenheimer analyst Ken Wong maintains an Outperform rating on Shopify Inc SHOP with a price target of $65.00.
- The analyst's updated revenue cohort analysis suggests there is room for potential upside to consensus estimates for FY23 and FY24 ($6.65 billion and $8.08 billion).
- Without a formal FY23 guide, the analyst explores four potential FY23 and FY24 revenue growth scenarios in an April 13 note titled "SHOP. Historical Cohort Behavior Suggests Consensus Revenue Has Headroom."
- The scenarios included 1) Pre-COVID Base case, 2) "New normal," 3) Optimistic, and 4) Bearish.
- The analyst's topline estimates are loosely anchored to a "pre-COVID" scenario in which cohort growth patterns revert to the pre-pandemic averages.
- The analyst found that if existing cohort growth patterns mirror pre-COVID averages (the analyst's current Baseline) and new cohorts added over the next two years continue to moderate from FY22's ~$309 million, Shopify should be able to meet or slightly exceed the consensus expectation for FY23. Additionally, 20%+ growth remains in play for FY24.
- Under the "new normal" scenario, FY20-FY21 boosts historical customer cohort growth with some drag from FY22.
- Shopify's cohort growth handicaps contributions from newer solutions, which the analyst sees as a source of potential medium-term upside.
- Better macro and broader new product adoption, a focus this year, should drive a significant upside.
- The analyst examined historical seasonal growth trends to sanity-check his assumptions.
- The analyst estimates the low end of historical quarterly growth would yield FY23 revenue of $6.75 billion, ahead of Street's $6.65 billion, consistent with his upbeat Shoptalk industry conversations.
- Shopify would have to post sub-trough quarterly growth rates this year to fall below FY23 consensus revenue.
- Price Action: SHOP shares traded higher by 1.48% at $45.98 on the last check Thursday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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