On Monday, Citi updated its outlook on Shopify Inc . (NYSE:SHOP), increasing the price target to $103 from $90 while sustaining a Buy rating on the stock.
The firm's optimism is driven by the potential for revenue growth and profitability in the latter half of 2024 and into 2025. Citi's projections indicate an EBIT growth of 60% year-over-year, surpassing the consensus by over 20%.
The analyst cited recent discussions with Shopify's investor relations, which bolstered confidence in the adoption of Shopify Payments and the cross-selling of various Merchant Solutions products such as Capital, Installments, and Cross-Border services. These insights have contributed to the positive outlook for Shopify's financial performance.
Citi also expects Shopify to gain from a lower interest rate environment, which is anticipated to benefit consumers and merchants alike and drive Gross Merchandise Volume (GMV). Citi projects Shopify's GMV to reach approximately $645 billion by the fiscal year 2028.
The firm's revised estimates for the third and fourth quarters of 2024 suggest that Shopify's earnings before interest and taxes (EBIT) could exceed current market expectations.
The price target adjustment reflects an update to Citi's valuation framework based on recent data. Citi maintains Shopify on its U.S. Focus List, indicating a strong conviction in the company's prospects among the firm's recommended stocks.
In other recent news, Shopify has been under the microscope of several analysts following its impressive Q2 performance, showing a significant 25% year-over-year revenue growth. The company's operating expenses have decreased compared to the previous quarter, marking the fourth consecutive quarter of profitability.
Moreover, Shopify's point-of-sale solution registered a 27% increase in offline Gross Merchandise Volume year-over-year, and the company has made significant strides in B2B commerce and international expansion.
Oppenheimer has maintained an Outperform rating on Shopify, while Redburn-Atlantic revised its rating from Neutral to Buy, setting a new price target of $99.00. Cantor Fitzgerald initiated coverage on Shopify shares with a Neutral rating and a price target of $70.00, acknowledging the company's potential for margin expansion and consistent Gross Merchandise Volume growth.
Roth/MKM maintained a Buy rating on Shopify, emphasizing the company's potential to scale its operations effectively. However, Piper Sandler retained a Neutral stance, focusing on the company's sales and marketing expense growth.
In terms of price targets, Loop Capital raised its price target for Shopify to $80, while Mizuho Securities increased its price target to $68, citing the company's strong Q2 performance. On the other hand, Citi reduced its price target to $90 despite maintaining a Buy rating. Morgan Stanley also expressed confidence in Shopify's future financial performance by raising the company's price target to $85. These are the recent developments that are shaping the discourse around Shopify.
InvestingPro Insights
Complementing Citi's optimistic outlook on Shopify Inc. (NYSE:SHOP), recent data from InvestingPro provides additional context to the company's financial position and market performance. As of the last twelve months ending Q2 2024, Shopify's revenue stood at $7.76 billion, with a notable growth rate of 23.18%. This aligns with Citi's expectations for strong revenue growth in the coming years.
InvestingPro Tips highlight that Shopify is trading at a low P/E ratio relative to its near-term earnings growth, suggesting potential undervaluation despite its high current P/E of 80.54. This could support Citi's increased price target if the company meets growth expectations. Additionally, Shopify's strong return over the last three months, with a price total return of 19.92%, indicates positive momentum that may continue into the projected growth period.
Investors should note that Shopify operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could provide financial flexibility as the company pursues growth strategies. For those interested in a deeper analysis, InvestingPro offers 13 additional tips on Shopify, providing a comprehensive view of the company's prospects.
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