Shopify isn’t done yet, National Bank Financial says

With its stock at dizzying heights, one could not be blamed for thinking the jig is up for Shopify (Shopify Stock Quote, Chart, News NYSE:SHOP). That would be a mistake, says one analyst.

The new customer-focused app from Shopify is more evidence that the Canadian tech sensation is right in tune with the growing global interest in e-commerce.

So says National Bank Financial analyst Richard Tse, who released a research flash update to clients on Tuesday. The analyst maintained his “Outperform” rating on SHOP and $700.00 target, which at the time of publication represented a projected one-year return of 10.2 per cent. (All figures in US dollars.)

Shopify on Tuesday announced the launch of Shop, a mobile shopping app for users to search out and buy from local businesses. The app has features from the previously released Shop Pay for check out and Arrive, Shopify’s package tracking application.

The company said whereas much of its past efforts have been focused on making commerce easier for small and medium-sized businesses, Shop now turns Shopify’s attention to the customer experience.

“We are setting out to reimagine the online shopping experience for customers — to provide them greater convenience, transparency, and personalization. As a result of social distancing and stay-at-home measures, customers have become more reliant on online ordering than ever before as it becomes more challenging to stay connected to the brands they love,” read the Shopify press release.

Tse said the “seemingly innocuous app” comes with a lot of potential to boost not only Shopify’s gross merchandise volume (GMV), the total dollar amount of orders processed on the company’s platform, but also its ad revenue via “sponsored” product categories for Shopify merchants.

Tse said the new app is in keeping with the company’s stated objective to “democratize” technology for the marketplace, in this case by addressing the shift to mobile commerce, which now makes up about 39 per cent of e-commerce in the US and 33 per cent in Canada.

“The app will allow merchants to access the mobile commerce market without having to build the tech on their own which can be cost prohibitive for SMBs. This includes the cost to acquire mobile customers. The app’s one-click pay feature may also help retailers increase their conversion rate as currently mobile app conversion rates in US are around 1.5 per cent versus 4.0 per cent from desktops,” Tse wrote.

“Bottom line, we continue to believe Shopify is in the early stages of a rapidly growing e-Commerce market that will eventually resume. Shopify remains a leading disruptor and we believe upside in the stock will come from organic growth from incremental growth drivers like International, new Merchant Services, Fulfillment and Shopify Plus (larger enterprises). Today’s product release further corroborates such view,” Tse said.

Ahead of Shopify’s next quarterly report due on May 6, the company last reported its financials in early February where its fiscal fourth quarter 2019 beat analysts’ estimates for both earnings at $0.43 per share and revenue at $505.2 million. For 2020, Shopify guided for revenue between $2.13 billion and $2.16 billion whereas analysts on average had expected $2.11 billion.