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

Shopify Inc SHOP held its Unite partners and developers conference June 18-20 in Canada.

The company's recently announced fulfillment, international expansion and retail initiatives should complement its core mission and enable the e-commerce platform to generate “a high rate of sales growth, for years to come,” according to D.A. Davidson.

The Analyst

Tom Forte maintained a Buy rating on Shopify and raised the price target from $290 to $400.

The Thesis

After attending the event, D.A. Davidson’s expectation for Shopify’s long-term adjusted  EBITDA margin to expand to 40.0% — versus 3.6% in 2018 — remains unchanged, Forte said in a Friday note. (See his track record here.) 

Meetings with partners, developers and management increased the analyst's conviction regarding the company’s vision of being “the first global retail operating system for the globe's largest community of entrepreneurs," he said.

Shopify has a strong management team, and CEO, Tobi Lutke has the capability to disrupt Amazon.com, Inc. AMZN, Forte said. 

The analyst also cited Shopify’s “thought process for capital allocation and prioritizing opportunities, including when it decides to create solutions and when it relies on its partners and developers' network” as another key insight that boosted his conviction in the company’s potential. 

Price Action

Shopify shares were down 3.46% at $315.46 at the time of publication Monday. The stock was downgraded by another sell-side firm, Roth Capital, from Buy to Neutral. 

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Photo courtesy of Shopify.