Shopify gets price target raise at National Bank

Shopify (Shopify Stock Quote, Chart, News NYSE:SHOP) just got a major bump from National Bank Financial analyst Richard Tse, who in an update to clients on Wednesday reiterated his “Outperform” rating but raised his price target from $700.00 to $850.00, saying that despite the economic fallout from COVID-19, Shopify remains a leading disruptor in the rapidly growing e-commerce industry.

Canadian e-commerce platform Shopify announced its first quarter 2020 results on Wednesday for the period ended March 31, 2020. The company managed to post 47 per cent year-over-year revenue growth, with management announcing a number of steps the company has taken to support its clients —small and medium-sized businesses, mostly— through the COVID-19 crisis, including an extended 90-day free trial for its plans, local in-store and curbside pickup and delivery and increased funding available through
its lending platform Shopify Capital.

“While the COVID-19 pandemic has subdued commerce globally and especially strained small and medium-sized businesses, it has accelerated the shift of purchase habits to e-commerce. Shopify is uniquely positioned to help businesses of all sizes during this time, helping entrepreneurs start online businesses, adapt to an evolving commerce landscape, and manage through a challenging macroeconomic environment,” the quarterly statement read.

As for the quarterly numbers, SHOP’s $470.0 million in total revenue and adjusted net income of $22.3 million or $0.19 per share were part of a strong Q1, according to Tse.

Subscription solutions revenue of $188 million was in line with Tse’s estimate while Merchant Solutions revenue of $282 million was well above the analyst’s $235 million estimate, due to a rise in Gross Merchandise Volume to $17.4 billion (Tse called for $15.4 billion) and a rise in the company’s overall take-rate to 1.62 per cent from 1.51 per cent a year earlier and from 1.56 per cent during the previous quarter. (All figures in US dollars.)

“While there are many puts and takes to those results (and the upcoming quarters) given the current backdrop, what the results do point to is an acceleration of a trend that was already in place – the shift from off-line to on-line commerce,” Tse wrote.

“And while Shopify held its position on withdrawing guidance, the growth drivers for the Company are still on course, if not accelerating, as Shopify directs investment towards those in-demand initiatives (SFN and Plus). And with a cash balance of more than $2.3 billion, we think the Company has ample capacity to execute on those value driving plans,” Tse wrote.

Tse said upside to SHOP will come from organic growth from incremental growth drivers including its International, new Merchant Services, Fulfillment and Shopify Plus segments.

Looking ahead, Tse has revised his forecasts, now calling for fiscal 2020 revenue of $1.937 billion (previously $1.847 billion) and EBITDA of $81 million. For fiscal 2021, he is forecasting $155 million in EBITDA on a top line of $2.605 billion.

At press time, Tse’s $850.00 target represented a projected 12-month return of 17 per cent.