Shopify will go higher, says Goldman Sachs

Saying it missed out on this year’s meteoric rise for Shopify (Shopify Stock Quote, Chart, News NYSE:SHOP), Goldman Sachs has now upgraded its rating on the Canadian e-commerce company.

In a Tuesday update to clients, analyst Christopher Merwin of Goldman Sachs moved his rating from
“Neutral” to “Buy” and brought out a new price target of $1,127.00 per share.

All eyes will be on Shopify as it delivers its second quarter earnings report on Wednesday morning, with investors hoping the company can repeat some of the success it showed in its Q1. One of the clear benefactors of the work-from-home and lockdown environments put in place in response to COVID-19, SHOP’s first quarter (ended March 31) featured just a taste of the company’s business during COVID-19 but still managed to surprise with revenue growth at 47 per cent year-over-year and Merchant Solutions revenue up 57 per cent.

Overall, gross merchant volume, which represents the total dollar value of orders processed through Shopify’s platform, for the Q1 was up to $17.4 billion, a 46 per cent increase, while adjusted net income rose from $7.1 million or $0.06 per share to $22.3 million or $0.19 per share.

As an indicator of how business has responded to the pandemic and the resultant shift in commerce from physical shops to online outlets, Shopify said its gross merchandise volume dropped by a full 71 per cent between March 13 and April 24 during the initial wave of the pandemic as it hit Europe and North America, SHOP reported that retail merchants on its platform ended up replacing 94 per cent of those lost in-store sales with online sales.

At press time, Merwin’s $1,127 target represented a projected one-year return of 20.3 per cent.

Year-to-date, SHOP is up 148 per cent. (All figures in US dollars.)