Shopify Hit With A Sector Weight Rating At PacCrest; Firm Likes Payments Biz

In a report published Tuesday, Pacific Crest Securities analyst Brendan Barnicle initiated coverage on

with a Sector Weight rating, citing valuation as the reason for the rating. In the report Pacific Crest Securities noted, "Shopify provides a comprehensive e-commerce platform for SMBs, replacing fragmented application alternatives." The solutions provided by Shopify are used by about 165,000 merchants across 150 countries and the platform processes close to $4 billion per annum in credit card transactions. This makes Shopify the leading e-commerce solution for SMBs. Analyst Brendan Barnicle said that the Shopify platform offers tiered subscription pricing and add-on applications, which satisfies the requirements of merchants as they grow, preventing them from seeking alternatives. Barnicle added, "Shopify Payments has the opportunity to leverage the company's merchant installed base with credit card processing fees to capture growing e-commerce sales flowing through its platform." E-commerce is estimated to be growing by about 15 percent per annum, but continues to be "largely underpenetrated for smaller merchants." In view of Shopify's SaaS market leadership and growing payments opportunity, Barnicle expects industry-leading growth to "continue for several years." While the stock is likely to trade at a premium valuation, the strong appreciation limits upside. Barnicle estimates the fair value at $35.