Shopify Gets Upgrade: Why Now?

Shopify Inc.’s SHOP strong top-line growth and margin expansion could persist going ahead, driven by the continued secular shift to e-commerce and its many strategic initiatives, according to Loop Capital Markets.

The Shopify Analyst: Anthony Chukumba upgraded the rating for Shopify from Hold to Buy, while maintaining the price target at $1,400.

The Shopify Thesis: The company offers a “compelling merchant value proposition” at highly attractive prices, which has made it a leading multi-channel commerce platform and is boosting its ecosystem, Chukumba said in the upgrade note.

“We believe Shopify’s growing ecosystem of third-party applications, developers, consultants, and agencies makes the platform even more valuable and the company’s 'flywheel' even more powerful,” he added.

“While the COVID-19 pandemic accelerated the shift to online shopping last year, we note the vast majority of retail sales still occur in physical stores — which indicates to us Shopify still has plenty of room to grow,” the analyst wrote.

He mentioned other drivers of top-line growth as:

• Increased penetration of its legacy Merchant Solutions
• Growth of newer initiatives such as the relaunched POS, SFN, Shopify Balance, and additional Shopify Plus enterprise customer wins
• Further international expansion

SHOP Price Action: Shares of Shopify are up 0.68% to $1,087.62 at the time of publication Tuesday morning.

(Photo by Roberto Cortese on Unsplash)