Shopify’s run isn’t over, says National Bank Financial

National Bank Financial analyst Richard Tse says Shopify’s (TSX, NYSE:SHOP) Q1 results have made him even more bullish on the stock.

This morning, Shopify reported its Q1, 2017 results. The company lost (U.S.) $13.59-million on a topline of $127.4-million, a topline that was up 75 per cent over the same period last year.

“With our excellent start to the year, it is clear we are becoming the de facto platform for sellers,” said CFO Russ Jones. “In addition to merchant growth and their adoption of both new channels and merchant solutions, we also continue to see expansion of merchants’ GMV. Retail is shifting headlong toward the vision we laid out two years ago — of inspiring entrepreneurship with multichannel commerce — and we fully expect to continue leading this industry transition for years to come.”

Tse says investors may be concerned about buying Shopify after such an outstanding run, but he says the company is just scratching the surface of its market opportunity.

“In our view, the Q1 results reinforced our investment thesis and more importantly we believe the upcoming growth drivers (Shopify Plus, take rate via new merchant services, and international) enhances our expectations for a long growth runway ahead for the name when its market share is still only around 5%,” says Tse. “Bottom line, we believe [increasing merchant base] x [increasing GMV] x [increasing take-rate] = more upside. Even with the stock up ~90% YTD, we’d be buyers of Shopify.”

In a research update to clients today, Tse maintained his “Outperform” rating on Shopify, but raised his one-year price target from (U.S.) $80.00 to $100.00, implying return of 26 per cent at the time of publication.

Tse thinks Shopify will generate EBITDA of negative $800,000 on revenue of $630.7-million in fiscal 2017. He expects these numbers will improve to EBITDA of $31.7-million on a topline of $898.7-million the following year.