Shopify scores a target raise from ATB Capital

ATB Capital Markets analyst Martin Toner likes what he sees from Canadian e-commerce king Shopify (Shopify Stock Quote, Charts, News, Analysts, Financials TSX:SHOP). After looking over the company’s just-released quarterly earnings, Toner on Thursday reiterated an “Outperform” rating on the stock while increasing his target price from C$75.00 to C$82.00, saying SHOP is on track to become a highly profitable business.

Shopify reported its fourth quarter 2022 financials on Thursday, with revenue up 26 per cent year-over-year to $1.735 billion and a net loss attributable to shareholders of $0.49 compared to a loss of $0.30 per share a year ago. The company’s Gross Merchandise Volume (GMV) increased by 13 per cent to $61.0 billion. (All figures in US dollars except where noted otherwise.)

“Shopify launched several new key strategic products in 2022, and we are excited about the potential for them to help our merchants succeed. In 2023, we will continue to bring innovative modern commerce solutions to the millions of Shopify merchants and their buyers,” said Harley Finkelstein in a press release.

Looking at the Q4 numbers, Toner called it a good quarter but with disappointing guidance, as management called for revenue growth in the high-teens, percentage-wise, for the current Q1 2023 compared to the consensus expectation of 20.9 per cent.

“The outlook may imply an adjusted operating income loss in Q1/23 however we believe the momentum throughout the Company’s fundamentals positions it well to exceed expectations on the top and bottom line going forward. We believe the Company can return to a pattern of beating expectations in 2023,” Toner said.

Shopify’s Q4 topline of $1.735 billion was a beat of both the consensus call at $1.653 billion and the ATB forecast at $1.606 billion, while adjusted EPS at positive $0.07 per share was also better than the Street’s forecast at negative $0.01 and ATB’s negative $0.05 per share.

Toner said Shopify continues to translate its many initiatives into strong GMV and attach rate growth while at the same time displaying notable discipline in terms of opex growth and raising prices.

“We forecast CAGRs through 2032 for GMV and revenue of 16.8 per cent and 21.1 per cent, respectively,” wrote Toner. “We expect Shopify to continue to add merchants and improve the take rate of Shopify’s revenue as a percentage of merchant’s GMV. Long term, as the Company continues to add revenue at high gross margins on a fixed cost base, we believe it will become highly profitable.”

At press time, Toner’s new C$82.00 target represented a projected one-year return of 14.8 per cent.