Analyst Predicts Shopify Revenue Growth To Exceed Pre-Covid Levels, Sees Significant Upside

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.

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