Following the company’s second quarter results, National Bank Financial analyst Richard Tse has raised his price target on Shopify (Shopify News, Stock Quote, Chart NYSE:SHOP).
This morning, SHOP reported its Q2, 2019 results. The company posted Adjusted Net Income of $15.8-million on revenue of $362.0-million, a topline that was up 48 per cent at the time of publication.
“It should be easier than ever to start a business, but entrepreneurship is still too hard,” said CEO Tobi Lütke. “Our job is to keep innovating on behalf of entrepreneurs so they can compete in an ever-changing retail landscape. Every announcement we made at Unite, especially the Shopify Fulfillment Network, is designed to democratize commerce and make it easier for our merchants to reach for independence.”
Tse says this was another strong quarter that featured guidance that was equally as strong for the third quarter and following year.
“While consistent execution is driving results, what’s also clear is an expanding addressable market that’s increasingly scaling as Shopify adds complementary solutions and services – the most notable (currently) being Shopify’ spending Fulfillment Network (“SFN”). For investors following our research, you’ll know we’ve called out the notion of operating momentum and TAM as drivers for these high growth names when it comes to valuation re-ratings – and in this case, Shopify continues drive those underlying metrics of valuation. Looking ahead, we only see more drivers to
enhance Merchant Services adoption and the commensurate take rate. As laid out in our recent report following the Company’s Partner Conference, Unite 2019, we see Shopify positioning towards multiple product cycles with the most notable (in our view) being it fulfillment network, Shopify Plus, an expanding POS offering and expanding tailored functionality in International markets. The knock for some is that those incremental drivers require accelerated investment in some cases, like SFN, which will require a lift in OPEX investment short term. Bottom line, we believe continued execution on those multiple incremental growth drivers supports its expanding valuation.”
Shopify Stock Price Target Raised Again
In a research update to client today, Tse maintained his “Outperform” rating on Shopify, but raised his one-year price target on the stock from (US) $350 to $400, implying a return of 15 per cent at the time of publication.
Tse thinks SHOP will post EBITDA of (US) $9-million on revenue of $154-billion in fiscal 2019. He expects those number will improve to EBITDA of $134-million on a topline of $2.04-billion the following year.