Shopify To Gain From Dominant Position In Omni-Channel Commerce Space: Analyst

Roth Capital Partners analyst Darren Aftahi reiterated a Buy rating on Shopify Inc. SHOP with a price target of $76.

The analyst sees slightly better Y/Y business growth for Shopify.

While there is time left in the third quarter, the analyst thinks that topline estimates could prove conservative, which are a touch higher than consensus.  

The analyst models for Q3 revenue/non-GAAP operating income of ~$1.674 billion/$158.6 million, which compares to consensus at ~$1.671 billion/ $163.0 million.

Quarter-to-date checks done by the analyst suggest a 180 bps upside to GMV growth, indicating a topline upside to the estimate, Aftahi notes.

The analyst notes that 3Q22 GMV came in at 10.5%, the easiest comparable of 2022, down 50 bps from 2Q22 levels. 

Overall, SHOP is trading closer to its highest growth SaaS peers with mid- to high-20% growth, the analyst adds. 

Aftahi thinks, given SHOP's size, global scale, and dominant position in the omni-channel commerce space, that a premium multiple is warranted.

On the negative side, the analyst cautioned that SHOP competes in a highly competitive space with companies that operate as ecommerce software vendors. 

The analyst adds that strengthening this competitive landscape could negatively impact SHOP's business.

For FY23, the analyst sees total revenues of $6.95 billion, with GAAP EPS of ($0.55).

Price Action: SHOP shares are trading higher by 4.7% to $58.97 on the last check Tuesday.