Shopify gets another price target raise at National Bank Financial

Following the company’s fourth quarter results, National Bank Financial analyst Richard Tse has raised his target price on Shopify (Shopify Stock Quote, Chart NYSE:SHOP).

This morning, Shopify reported its Q4 and fiscal 2018 results. In the fourth quarter, the company lost (All Figures USD) $9.5-million on revenue of $343.9-million, a topline that was up 54 per cent over the same period a year prior.

“We made history in 2018: No other SaaS company has crossed the $1-billion dollar revenue mark at a faster growth rate than Shopify has,” CEO Tobi Lutke said. “This milestone is significant due to the backdrop: Shopify allows people to partake in the entrepreneurial world who would otherwise not be able to do so. We have been focused on growing this market for the past 12 years even though a lot of people told us that this isn’t a valuable business model. We let the results speak for themselves.”

Tse says there are continued reasons to be bullish on Canada’s most famous tech name.

“Shopify reported strong FQ4 results this morning,” the analyst says. “Beyond the quarter, guidance for FQ1 and F19 was in line with expectations for Revenue with softer than expected adjusted EPS care of investment into a wide breadth of initiatives from platform / products to market segments (International / Shopify Plus). In our view, the FQ4 results and conference call commentary around those results and the outlook continues to support our investment thesis on this name where we see scaling growth (optionality) from International and large enterprises (Shopify Plus). In our view, we’re in the early innings of those incremental growth drivers kicking in while the existing customer base continues to expand its spend with Shopify as evidenced by the increasing take rates in that cohort. As for the softer than expected EPS guidance, we think it’s largely to accelerate growth investments to capture new markets and market share.”

In a research update to clients today, Tse maintained his “Outperform” rating on Shopify, but raised his one-year price target on the stock from (US) $180 to $200, implying a return of 19 per cent at the time of publication.

Tse thinks Shopify will post EBITDA of $27.0-million on revenue of $1.49-billion in fiscal 2019. He expects those numbers will improve to EBITDA of $110-million on a topline of $1.99-billion the following year.

“We continue to believe Shopify is early in a rapidly growing e-Commerce market,” the analyst adds. “Like other disruptive leaders, we believe the upside in the stock comes from the underlying fundamental growth as we look beyond the short term as incremental growth drivers of International and Shopify Plus (larger enterprise) begin to scale meaningfully.”