Citi raises price target on Shopify

Ahead of the company’s fourth quarter results, Citi analyst Tyler Radke has raised his price target on Shopify (Shopify Stock Quote, Chart, News, Analysts, Financials NYSE:SHOP).

As reported by the Globe and Mail January 8, Radke, in a research update to clients, maintained his “Neutral” rating but raised his price target on SHOP from (US) $87.00 to $96.00.

The analyst says he believes the margin mix is improving for Shopify.

“We’ve become increasingly positive on Shopify’s margin story supported by opex discipline + 4Q guidance which suggests opex ‘down low single digits’ which could be conservative,” he wrote.  “Assuming a higher than 100 basis points operating margin beat in Q4, Shopify can exit 2023 with OPM near 20 per cent which provides a strong baseline for margin upside in 2024 considering consensus estimates are at 16.5 per cent. However, with the absence of long-term targets at December’s Analyst Day and shares trading 61 times 2025 estimated FCF vs. 31 times for front office peers, we remain on the sidelines and await a better entry point.”

Radke says he expects a good-looking fourth quarter from the Ottawa-based company.

“We are upbeat on SHOP fundamentals heading into 4Q with guidance looking conservative with expected high-teens revenue year-over-year growth, despite strong BFCM [Black Friday Cyber Monday] sales and 4Q GMV [gross merchandise volume] seasonality which implies incremental upside to street estimates,” the analyst said. “Our front office checks suggest newer products like Shopify Audiences and Markets are gaining traction and the Shop App continues to become more important to the ecosystem.”