Shopify target chopped at RBC on tariff concerns

RBC Dominion Securities analyst Paul Treiber thinks Shopify (Shopify Stock Quote, Chart, News, Analysts, Financials NYSE:SHOP) faces tariff troubles.

As reported by the Globe and Mail, Treiber April 17 maintained his “Outperform” rating but cut his price target on Shopify from (US) $145.00 to $125.00.

The analyst says dropshipping, the practice of selling a product without having it in stock and then ordering it from a third party, accounts for a material amount of Shopify’s Gross Merchandize Value.

“We estimate U.S. dropshipping accounts for 5-10 per cent of Shopify’s total GMV,” he wrote. “The removal of the de minimis exemption on packages from China are likely to lead to a material reduction in Shopify’s dropshipping GMV in the near-term (our revised estimates reflect a 50-per-cent drop). Additionally, we estimate China sourced products represent 25-30 per cent of imports in Shopify’s core verticals; inflationary pressure as a result of tariffs are a likely headwind to global discretionary consumer spending.”

But Treiber cautions that Shopify may actually gain ground against competitors who face th same landscape because the company is more competitive. He also notes that, while not a cheap stock, Shopify’s valuation has become more compelling.

“Given tariff/macro concerns, Shopify’s valuation has dropped to 9.9 times NTM EV/S [next 12-month enterprise value to sales], below its 3-year pre-COVID average (13 times), though remains above fast-growing SaaS peers (8.6 times),” he said. “We are reducing our price target from $145.00 to $125.00, which is now based on 12 times CY26e EV/S, down from 14 timesprior, as we believe valuation is likely to remain below Shopify’s 3- year pre-COVID average in the short-term. We maintain our Outperform recommendation as we believe Shopify is one of the most compelling long-term organic growth stories in our coverage.”