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Shopify Inc (NYSE:SHOP) launched Fulfillment in June last year. Although the new Fulfillment solution offers attractive cross-sell opportunities, the planned investment would exert pressure on the company’s margins for the next several years, according to Mizuho.
The Analyst
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Mizuho’s Siti Panigrahi initiated coverage of Shopify with a Neutral rating and a price target of $410.
The Thesis
Shopify is a leader in cloud e-commerce solutions and is well-positioned to generate robust revenue growth, especially given the favorable secular trends, Panigrahi said in the initiation note.
Shopify is targeting a market that is large, estimated at around $30 billion and expected to sustain strong growth, the analyst mentioned. He added that the company is also likely to continue gaining share from legacy incumbent ecommerce vendors.
The recently launched Fulfillment solution enjoys synergies with the company’s products and merchant data, Panigrahi noted. He estimated the cross-sell opportunity at around $9 billion.
The analyst added, however, that Fulfilment is still in the early phases of adoption within Shopify’s installed base and the company’s planned investment in this solution could be a drag on margins several years to come.
Shopify’s shares had appreciated by around 215% in 2019 and the company’s bright prospects seems already priced into the stock, Panigrahi said.
Price Action
Shares of Shopify were trading nearly flat at $430.80 at time of publication Friday.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.