This Is All Shopify Analysts Wanted

• Shopify Inc SHOP shares have plunged 11 percent in the last one month, declining from a high of $38.70 on October 5.
• RBC Capital Markets’ Ross MacMillan upgraded the rating on the company from Sector Perform to Outperform, while maintaining the price target at $39.
• A better entry point, new monetization opportunities, moderating competition and accelerating fundamentals call for the upgrade in rating, MacMillan said.

Analyst Ross MacMillan mentioned that Shopify is “entering an inflection period” with merchant adds, MRR per merchant and GMV per merchant all moving higher. He added that new monetization initiatives, like shipping and buy buttons, are not being appreciated enough, while new partnerships and channels could boost merchant adds and GMV per merchant further.

Amazon's webstores exit and other factors point towards improving competitive dynamics. Moreover, Shopify’s shares are currently at the same level as they were in June, which offers an attractive entry point.

Positives At Shopify

MacMillan enumerated the positives as:

1. Merchant adds are likely to have risen to an estimated 22K in 3Q, from 16K in 2Q15 and 13K in 3Q14
2. Growth in MRR per merchant is estimated at 12 percent y/y, up from 8 percent y/y in 2Q15, although flat to down as compared to 3Q14
3. GMV per merchant growth is likely to have risen to 29 percent y/y from 24 percent y/y in 2Q15
4. Take rate has moved higher to 1.22 percent, from 1.10 percent in 2Q15 and 1.01 percent in 3Q14
5. The company’s operating cash flow is positive
6. Partnerships and new features are currently in their nascent stage and would boost merchant adds and GMV per merchant going forward