On Monday, Phillip Securities adjusted its stance on Shopify stock (NYSE: NYSE:SHOP), changing the rating from Buy to Accumulate while increasing the price target to $140.00, up from the previous $105.00. The adjustment follows Shopify's Q4 performance, which aligned with revenue forecasts and exceeded profit expectations due to effective cost management. Trading near its 52-week high of $128.57, InvestingPro analysis suggests the stock is currently overvalued, with a P/E ratio of 81.4x. The firm's analysis pointed out that Shopify's fiscal year 2024 revenue and profit after tax and minority interests (PATMI) reached 102% and 167% of their projections, respectively.
Shopify's annual revenue reached $8.88 billion with a 25.78% year-over-year growth, driven by increases in both subscription solutions, which rose by 27% due to a growing number of merchants and a roughly 30% increase in subscription fees, and merchant solutions, which grew by 33% on the back of robust Gross Merchandise Volume (GMV) and wider adoption of Shopify payments. InvestingPro data reveals impressive financial health metrics, including a strong current ratio of 3.71 and moderate debt levels. Phillip Securities has updated its valuation to the next fiscal year, taking into account the company's continued dominance as an e-commerce platform and its upward trending operational margins.
The firm has also revised its estimates for Shopify's future financial performance, with a 2% increase in projected FY25 revenue to reflect the higher growth rate of subscription and merchant solutions. Additionally, the FY25 PATMI forecast has been raised by 38% to recognize Shopify's growing emphasis on cost discipline. The new discounted cash flow (DCF) target price of $140 is based on a weighted average cost of capital (WACC) of 7.0% and a terminal growth rate of 5%.
Phillip Securities highlighted Shopify's ongoing expansion of its leadership role as an e-commerce enabler, with a consistent rise in the number of merchants, increasing pricing, and improving operation margins, which demonstrates the company's capacity to realize growth in both revenue and profits. With a remarkable 57.89% return over the past year and 72.17% over the last six months, InvestingPro subscribers have access to 20 additional key insights and a comprehensive Pro Research Report that could help inform investment decisions. Despite the positive outlook, the firm's decision to downgrade the stock rating from Buy to Accumulate is attributed to Shopify's recent price performance.
In other recent news, Shopify has been the subject of several analyst notes following its robust fourth-quarter earnings report. RBC Capital raised its price target for the company to $145, citing the company's significant strides in market share expansion and its ability to surpass revenue expectations. DA Davidson also showed continued confidence in Shopify by increasing the price target to $150, highlighting the company's robust top line growth and promising undervalued growth opportunities in enterprise and international markets.
Benchmark maintained a Buy rating on Shopify with a $150 target, emphasizing the company's momentum and expanding network effects. The firm discussed the potential growth from enterprise clients and a significant leverage milestone, reflecting confidence in Shopify's ongoing growth trajectory. Piper Sandler, while maintaining a Neutral rating, increased the price target for Shopify to $104, reflecting the company's strong performance, particularly in international markets.
Finally, JPMorgan maintained an Overweight rating on Shopify and increased the price target to $124, based on the company's strong volume and revenue growth along with free cash flow margin upside. These recent developments suggest a generally optimistic outlook from analysts regarding Shopify's financial performance and growth potential.
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