The completion of a financing and what the company might do with the proceeds has Industrial Alliance Securities analyst Blair Abernethy feeling bullish of Shopify (TSX, NYSE:SHOP).
On Wednesday, Shopify announced it had closed a (U.S.) $500-million share offering. The company said the proceeds would be used to strengthen its balance sheet or support growth.
Abernethy says he thinks this cash will be used for acquisitions.
“We see this financing as providing Shopify with greatly increased flexibility to pursue its expanding range of growth opportunities both organically and, potentially, through acquisitions,” he says. “In terms of acquisitions, we believe Shopify could accelerate its product roadmap through the acquisition of emerging technologies, particularly in the artificial intelligence (AI) space. We also see opportunities for Shopify to broaden its offering through the acquisition of growth platforms in adjacent markets, such as accounting software (for example, private companies such as Wave or Freshbooks with millions of small business users could be of interest), marketing automation solutions, and logistics for small businesses.”
In a research update to clients today, Abernethy maintained his “Buy” rating on Shopify but raised his one-year price target on the stock from (U.S.) $87.00 to $100.00, implying a return of 10.8 per cent at the time of publication, including dividend.
Abenrnethy thinks Shopify will post Adjusted EBITDA of $6.9-million on a topline of $629.1-million in fiscal 2017. He thinks these numbers will improve to EBITDA of $$38.2-million on a topline of $871.1-million the following year.