The volatility which defined the final weeks of 2021 has spilled into 2022 and growth stocks have once again been taking a hit. For example, Shopify (SHOP) has stuttered out of the gate, with the stock shedding ~14% of its value in the year’s first two sessions.
On another sour note, according to a Baird e-commerce platform analysis, compared to Q2 and Q3, the Shopify merchant count remained flat or trended down slightly in Q4.
That said, this is not much of a concern for Baird analyst Colin Sebastian, who thinks larger e-commerce platforms were well-positioned to deal with any supply chain issues. In fact, Sebastian believes Shopify “likely finished 2021 on a decent revenue glide path.”
Sebastian also notes that the “moderating merchant trend” follows huge pandemic-driven growth in 2020 and 1H21 as Shopify hosted hundreds of thousands of merchants and brands that “shifted focus” to e-commerce during the pandemic.
And more positively, the analyst’s checks indicate the number of Shopify Plus merchants are accelerating, a trend which corresponds with the company’s “move upstream” compared to Big Commerce, SAP Hybris and Salesforce Commerce Cloud.
As for Q4’s results (expected in mid-Feb), despite the merchant trends note above, Sebastian expects these to come in “directionally in line with expectations,” with a possible late Q4 boost due to the Omicron effect, and a muted impact from supply chain snags and privacy-related headwinds affecting customer acquisition.
Looking ahead, Sebastian anticipates more attention will be paid to competitive issues this year, but still foresees “significant monetization growth through Shopify’s enterprise, fulfillment, financial services, and nascent consumer-facing apps.”
“Overall,” the 5-star analyst summed up, “Shopify remains one of our top long-term ideas given a favorable competitive positioning and future take-rate expansion opportunities.”
Accordingly, Sebastian rates SHOP shares an Outperform (i.e. Buy) along with a $1,650 price target, which suggests shares will see 39% growth over the next 12 months. (To watch Sebastian’s track record, click here)
The rest of the Street is almost evenly split down the middle on this one, with the bulls ultimately in control; based on 11 Buys vs. 9 Holds, the stock has a Moderate Buy consensus rating. However, on where the share price is heading, the outlook is more conclusive; the $1,647.59 average target is practically the same as Sebastian’s. (See Shopify stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
Source: https://finance.yahoo.com/news/shopify-remains-top-long-term-211914118.html