Shopify wins price target hike at Citi

The days of it being the first thing anyone talks about in the capital markets may be over, but that doesn’t mean the days of making money on Shopify are. (Shopify Stock Quote, Chart, News, Analysts, Financials NYSE:SHOP).

So says Citi analyst Tyler Radke, who in a research report to clients September 30th maintained his “Buy” rating and raised his price target on SHOP from (US) $90.00 to $103.00.

In a report covered by the Globe and Mail today, Radke explained the reason behind his increased optimism.

“We connected with IR pre-quiet period who seemed upbeat on payments and cross-sell of Merchant Solutions products (Capital, Installments, Cross-Border, Offline, etc.) and Shopify’s push upmarket,” the analyst wrote. “Although Shopify is seeing strong momentum upmarket, we highlight that this is still a relatively small part of the business, with higher volume, but lower margins (enterprise customers receive volume discounts). Management pointed out that larger merchants are increasingly coming to Shopify for Payments via Shopify Commerce Components, and there’s no plan to disclose enterprise or Commerce Components economics in the near-term (Enterprise = $125-million-plus in GMV). Enterprises often come for Shop Pay first, either from headless perspective, singular/couple components or full stack. And latest anecdotes from Shopify competitors and partners suggest Shopify is continuing to steal share among enterprise merchants (as we initially discussed in our deep dive – Shopify Inc (SHOP.N): Adding to Cart: Positive Checks + Confidence on MS Biz). International expansion is still geared towards getting products in market and is currently a headwind given limited product availability but will improve as adoption grows.”

The analyst expanded upon his increased bullishness.

“Our confidence is underpinned by a more resilient e-commerce backdrop and accelerated share gains up market,” he added. “Our Deep-Dive analysis into SHOP’s Merchant Solutions business gives us confidence in SHOP’s long-term growth as take-rate expansion accelerates in 2025+ fueled by new product/feature adoption going mainstream. With shares off 20-per-cent-plus from year-to-date highs and trading at a discount on growth adjusted valuation (vs. large cap peers), we see an attractive entry point.”