Industrial Alliance raises price target on Shopify

Industrial Alliance Securities analyst Blair Abernethy says he expects continued positive momentum from Shopify (Shopify Stock Quote, Chart, News: TSX, NYSE:SHOP) when the company reports its first quarter results on May 2.

Abernethy expects Shopify will post Adjusted EPS of $0.10 and EBITDA of $4.8-million on revenue of $120.7-million in the first quarter of 2017. The street consensus calls for the same EPS number, but EBITDA of $5.2-million and revenue of $121.6-million.

Abernethy says SHOP is by no means cheap, but has proven that it commands a high valuation.

“We compare Shopify to high growth SaaS/e-commerce companies, which have moved up and are now trading in the 7-9x EV/Sales range or higher, while growing at a slower pace than Shopify. Given our long-term outlook on the business and the passage of time, we are moving our EV/Sales multiple range up to 7-8x (was 6-7x),” says the analyst. “Shopify has built a rapidly expanding platform that addresses the omni-channel e-commerce needs of early stage enterprises and can accommodate them as they grow. In our view, Shopify can sustain its high growth rate for the next few years, thus justifying its high multiple.”

In a research update to clients today, Abernethy maintained his “Buy” rating, but raised his one-year price target on SHOP from $65.00 to $73.00 implying a return of 0.5 per cent at the time of publication.

Abernethy thinks SHOP will generate EBITDA of $2.5-million on revenue of $594.7-million in fiscal 2017. He expects these numbers will improve to EBITDA of $44.3-million on a topline of $803.2-million the following year.