Shopify Expects Stronger Margins And EBIT In FY24: Analyst

Oppenheimer & Co. Inc analyst Ken Wong raised the price target of Shopify Inc SHOP to $80 from $70 with an Outperform rating.  

The analyst is bullish on the company's strategic shift toward balanced growth on the second round of layoff and divestiture of most of its former Logistics business. 

Consensus margin forecasts stepped up significantly, yet, the analyst sees noteworthy headroom for further upside due to a disconnection between layoff plans and the eventual headcount leaving the company. 

The analyst expects total operating expense savings of around $750 million on employees transferring to Flexport (estimates an additional ~1,000 vs. potentially 1,500 staff). 

Wong sees the FY24 consensus EBIT of around $650 million as significantly understated and expects it to come closer to the raised estimate of $1.15 billion (up from $885 million). 

The analyst expects Merchant Solutions' gross margins to be in the 40% range (vs. 38.5% previously, as fulfillment costs are removed from COGS) and blended non-Payments gross margins in the 80% range.

Also Read: Shopify Stock Is Hitting 52-Week Highs: What's Going On?

Price Action: SHOP shares are trading lower by 0.48% at $64.42 on the last check Tuesday.