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The rising demand for digital services has cultivated an environment ripe for continuous growth, as consumers increasingly turn to the Internet for various daily necessities. The e-commerce market is projected to hit over $7.9 trillion by 2027, propelled by surging internet access, increasing smartphone adoption, and advancements like 4G and 5G connectivity.
Shopify Inc (SHOP) is the go-to powerhouse for online retailers, offering various services. Shopify stock was on the rise on April 29 after Citigroup (C) analyst Tyler Radke upgraded it to a "Buy" from a "Neutral" rating, increasing his target price from $93 to $105.
The analyst's confidence in SHOP's long-term growth derives from an in-depth analysis of its Merchant Solutions business. Strong e-commerce trends and resilient consumer demand further bolstered confidence, with the Citi analyst also noting a "more reasonable valuation" as a key factor in the upgrade.
Considering its over 18% drop from February highs, growth stock Shopify might be a solid buy now.
About Shopify Stock
Based in Ottawa, Canada, e-commerce giant Shopify Inc (SHOP) provides a global platform for merchants to manage sales across various channels. It empowers entrepreneurs with integrated tools for inventory, payments, and customer engagement to thrive online. Its market cap currently stands at $92.6 billion.
Shares of Shopify have surged by 60.5% over the past 52 weeks, outperforming the broader S&P 500 Index's ($SPX) 25.5% gain over the same time frame.
Shopify stock trades at 124.05 times forward earnings and 12.83 times sales - not objectively cheap, but lower than its own five-year averages.
Shopify Q4 Earnings Beat Wall Street Projections
On Feb. 13, Shopify reported Q4 earnings that surpassed Wall Street’s estimates on both the top and bottom lines. Its adjusted EPS grew 385.7% year over year to $0.34, exceeding expectations by 13.1%. Its revenue grew 23.6% annually to $2.1 billion, marginally surpassing analysts’ forecast. Its free cash flow margin for the quarter was 21%, compared to 5% in the previous year quarter.
Management anticipates revenue growth in the mid-to-high-twenties year over year and a 150 basis point increase in gross margin for Q1. Also, stock-based compensation is expected to be around $105 million, with a sequential improvement in free cash flow as a percentage of revenue every quarter throughout the year.
The company is expected to report its Q1 earnings results on Wednesday, May 8, before markets open, with the consensus looking for a profit of $0.08 per share in next week’s release.
Analysts tracking Shopify expect the company’s profit to surge 132% year over year to $0.58 in fiscal 2024, and grow another 53.5% to $0.89 per share in fiscal 2025.
What Do Analysts Expect for Shopify Stock?
Shopify stock has a consensus "Moderate Buy" rating. Out of 39 analysts covering SHOP, 15 recommend a "Strong Buy," one gives a "Moderate Buy," 21 advise a "Hold" rating, and two give a "Strong Sell" Rating.
The average analyst price target of $83.65 indicates a relatively modest upside potential of 12.4% from current levels. However, the Street-high price target of $105 suggests the stock could rally as much as 40.9% from current levels.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
