The viral outbreak might be having a ruinous effect on a host of industries, but it is no secret some have thrived in these conditions. Hardly any more so e-commerce platform Shopify (SHOP). Shares are up by 133% year-to date, although to be fair, it’s not as if Shopify needed a helping hand before the pandemic struck. Overall, since debuting on the New York Stock Exchange for $28 a share in May 2015, the stock is up by 3,320% and Shopify has positioned itself as one of the 21st century’s tech giants.
But there’s room for another slight uptick from here, argues RBC analyst Mark Mahaney. The 5-star analyst expects Shopify shares to be changing hands for $1000 apiece over the next months, implying 8% of upside. (To watch Mahaney’s track record, click here)
Driving Mahaney’s bullish outlook is a recent report by RBC Elements – the investment firm’s data science team - that analyzed Shopify’s merchant base and reached the following conclusions: “1) Shopify’s gross merchant adds appear to have accelerated in Q2; 2) Shopify’s merchant churn appears below historical trends; and 3) Shopify’s merchant mix is only 58-68% consumer discretionary.”
Mahaney believes “these results are stronger than most investors assume.”
As of July 7, Shopify had 1.42 million merchants, which is 1.15 million more than at the end of Q1. In Q2, gross merchant adds increased by 88% quarter-over-quarter from 217,000 to 407,000, while also rising by 83% year-over-year.
On the flip side, and indicating another positive trend, in Q2, merchant churn was 137,000, which amounts to 12% of total merchants at the beginning of the quarter. This is a lower rate than the 185,000 - or 17% - exhibited in Q1 and lower than the last 4 quarters’ average churn rate of 15%.
An improvement in Shopify’s Amazon Alexa Website ranking is also indicative of increasing popularity. Over the last 90 days, Shopify has climbed in the rankings from 55 to 33.
So, that’s RBC’s take, now let’s take a look at the rest of the Street’s view. Based on 8 Buy ratings, 13 Holds and 1 Sell, Shopify has a Moderate Buy consensus rating. However, the analysts expect the share price to decline by 7% over the next 12 months, as the $888.79 average price target implies. (See Shopify stock-price forecast on TipRanks)
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