Shopify’s Black Friday Weekend sales another positive sign, Industrial Alliance says

Black Friday weekend sales that were up more than 50 per cent are another sign that Shopify’s (Shopify Stock Quote, Chart: TSX:SHOP) rapid growth is continuing, says Industrial Alliance Securities analyst Blair Abernethy.

On Wednesday, Shopify announced that its Black Friday weekend sales topped $1.5-billion, peaking at 10,978 sales per minute.

“Mobile shopping has firmly established itself as the new normal, with 66% of sales from Shopify merchants happening on mobile during BFCM versus 34% on desktop,” the company commented on its own blog. “Shopify merchants had the tools to handle the mobile-first preference among BFCM shoppers, with responsive themes and multiple mobile-friendly payment options. Shopify Pay, Apple Pay, and Google Pay all streamline the process of checking out, making it easier to complete a purchase on any device. Merchants like Victoria Emerson have seen up to 4x higher conversions during BFCM thanks to Shopify Pay.”

Abernethy says this is an unambiguously good sign.

“We view these results as an incremental positive, supporting and perhaps exceeding our Gross Merchandise Value (GMV) estimates for Q4 of up ~40%, the analyst says. “We expect Shopify to rapidly increase its store count, add new products, and gain traction on Shopify Plus with global brands in coming years thus justifying a premium multiple.”

In a research update to clients today, Abernethy maintained his “Buy” rating and one-year price target of $170.00 on Shopify, implying a return of 13.4 per cent at the time of publication.

The analyst thinks the company will post Adjusted EBITDA of (US) $36.5-million on revenue of $1.05-billion in fiscal 2018. He expects those numbers will improve to EBITDA of $71.6-million on a topline of $1.46-billion the following year.

“At this juncture, we are leaving our Merchant Solutions revenue estimates unchanged, but with a small upward bias,” Abernethy adds. “Our target price remains $170.00, which equates to 10x EV/Sales on 2019E/2020E. We compare Shopify to other high growth SaaS/e-commerce companies, which are trading in the 7-9x EV/Sales range with best-in-class vendors at over 10x.”