Sell-Side Boosts Expectations, Raises Price Targets For Shopify After Strong Q2 Earnings

Analysts lifted revenue estimates and price targets significantly on Shopify Inc SHOP after the Canadian e-commerce company topped expectations on several fronts when it reported second-quarter results.

Shopify reported a strong revenue beat on a 51% jump in gross merchandise sales and a 42% increase in Shopify Payments penetration. The stock got a boost on Thursday after the print but was giving back gains on Friday.

Management also raised guidance for fiscal 2019 revenue by $30 million (midpoint) to $1.52 billion.

The Analysts

Wells Fargo’s Timothy Willi reiterated an Outperform rating on the stock and boosted the price target from $275 to $400.

KeyBanc’s Josh Beck raised the target price from $350 to $385 while keeping an Overweight rating on the stock. Beck also raised his revenue estimates for the company.

Bank of America analyst Brad Sills also significantly boosted his price target on the stock from $185 to $300 while raising revenue estimates but reiterated an Underperform rating.

The Theses

Analysts raised 2019 and 2020 revenue estimates, citing better-than-expected subscriptions and merchant solutions trends.

“The growth runway at Shopify is substantial, and our checks at three recent conferences reinforced product differentiation and market receptivity,” wrote KeyBanc’s Beck. “Shopify's cloud-based, mobile-centric platform is well positioned to capitalize on the m-com wave given an impressive innovation velocity and vibrant partner ecosystem.”

Willi noted that Shopify’s management highlighted several positives, including the addition of 11 new languages to the company’s site, added payment capabilities in Europe and other enhancements.

Shopify also noted a stronger than expected response to its fulfilment network (SFN), Willi said, adding that would help benefit new merchant acquisition while helping existing merchants reduce shipping costs and times and drive further gross merchandise volume growth.

“We believe management will continue to innovate and evolve with the changing e-Commerce landscape, while capitalizing on pockets of opportunity,” Willi wrote in a note.

While also raising the price target, Sills said the stock is too expensive.

“While we share positive sentiment for international and fulfillment long term, we remain at Underperform, given valuation … and moderating customer economics from sales/marketing investment,” Sills wrote.

Price Action

Shopify shares were down 3.3% to $330 on Friday afternoon.

Related Links:

Shopify Trades Higher On Q2 Earnings Beat

DA Davidson: Shopify Could Sustain Solid Sales Growth For Years To Come