A strong second quarter has National Bank Financial analyst Richard Tse raising his price target on Shopify (TSX, NYSE:SHOP).
This morning, Shopify reported its Q2, 2017 results. The company lost $14.03-million on revenue of $151.7-million, a topline that was 75 per cent better than the same period last year.
“The fundamental shift in retail toward multichannel and mobile, the ongoing adoption of Shopify by larger brands, and our continued focus on building out the market-leading platform for sellers all contributed to the strength of our results this past quarter,” said CFO Russ Jones. “As we have been able to predict and capitalize on these shifts, and continue to innovate so entrepreneurs of all sizes can take advantage of them, we feel we are exceptionally well positioned for the next several years.”
Tse says things continue to improve at Shopify.
“In our view, Shopify’s Q2 results and increased guidance range suggests continued momentum with what was actually accelerating growth in some key metrics this quarter like monthly recurring revenue (MRR) which grew by 64% (vs. 62% last Q) and new merchant adds which grew by 67% (vs. 49% last Q). That acceleration comes off what were already outsized growth rates,” the analyst says. “If that weren’t enough, Shopify’s take-rate also increased (albeit slightly) to 1.37% (+9 bps y/y and +3 bps q/q). Bottom line, with expanding operating leverage, we believe the Company continues to be on course to adjusted operating breakeven by Q4 this year.”
In a research update to clients today, Tse maintained his “Outperform” rating on Shopify, but raised his one-year price target from (U.S.) $100.00 to $120.00, implying a return of 19 per cent at the time of publication.
Tse thinks Shopify will generate EBITDA of $7.0-million on revenue of $655-million in fiscal 2017. He expects those numbers will improve to EBITDA of $34.7-million on a topline of $962.7-million the following year.