Shopify Analyst: E-Commerce Platform Could Sustain 30% CAGR Through 2030

Although Shopify Inc SHOP has an impressive, expansive vision and has exhibited strong execution to date, the stock is already pricing in its bright prospects, according to Morgan Stanley.

The Shopify Analyst: Keith Weiss initiated coverage of Shopify with an Equal-Weight rating and $970 price target.

The Shopify Thesis: The company serves a total addressable market of $78 billion globally, which could enable it to sustain a compounded average growth rate of around 30% through 2030 and hit $25 billion in revenue, Weiss said in the Monday initiation note.

Shopify’s margins are presently below the industry average, the analyst said. 

“We see SHOP growing the merchant base from 1 million today to 4.6 million by 2030 (Subscription Solutions reaching $4.2 billion), while also expanding the take rate and further powering the Merchant Flywheel (GMV reaches $737B, Merchant Solutions grows to $21 billion),” he said. 

“However, with our projection of 22% FCF margins and a $123 billion EV today, investors are already paying 23x our 10-year forward FCF forecast,” Weiss said.

Morgan Stanley recommends looking for a “more attractive entry point, either on a pullback or early indications that estimates have to move meaningfully above our framework.”

SHOP Price Action: Shopify shares were trading 0.8% higher to $1,037.20 at last check Monday. 

Photo courtesy of Shopify.