On Wednesday, Baird maintained its Outperform rating on Shopify (NYSE: NYSE:SHOP) and increased the stock's price target to $90 from the previous $79. The firm's decision follows the observation of favorable trends in a recent e-commerce platform survey. The survey highlighted a robust growth in Shopify's core services, Plus, international, and Enterprise offerings.
The analyst from Baird noted that while Shopify's shares tend to fluctuate around the time of quarterly earnings reports, the company remains attractive based on the latest survey data from early October. The survey indicates that Shopify is continuing to experience a healthy increase in its business segments. This growth is expected to contribute to the company's gross merchandise volume (GMV), revenue, and operating income (OI) in the upcoming years.
Investors are reminded that Shopify's marketing expenses likely increased in the third quarter and are anticipated to rise again in the fourth quarter. This increase in spending is expected to moderate the incremental operating margins. Despite this, Baird has modestly raised its estimates for Shopify's future GMV, revenue, and OI, taking into account a scenario where economic conditions gradually improve without a severe downturn, commonly referred to as a "soft landing."
The analyst's statement reflects confidence in Shopify's ability to manage its operating margins amid higher marketing expenditures. The firm's updated price target of $90 takes into consideration the potential for Shopify to continue its growth trajectory in a stabilizing economic environment.
In other recent news, Shopify has been the focus of several analyst assessments following its impressive Q2 performance, which saw 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.
Citi has updated its outlook on Shopify, driven by the potential for revenue growth and profitability in the latter half of 2024 and into 2025. The firm's projections indicate an EBIT growth of 60% year-over-year, surpassing the consensus by over 20%.
Oppenheimer has maintained an Outperform rating on Shopify, while Redburn-Atlantic revised its rating from Neutral to Buy. Cantor Fitzgerald initiated coverage on Shopify shares with a Neutral rating, 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. These are the recent developments that are shaping the discourse around Shopify.
InvestingPro Insights
Shopify's recent performance and future outlook align well with the positive sentiment expressed in Baird's analysis. According to InvestingPro data, Shopify's revenue growth remains strong, with a 23.18% increase in the last twelve months as of Q2 2024. This robust growth supports Baird's observations of favorable trends in Shopify's core services and offerings.
InvestingPro Tips highlight that Shopify is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.52. This suggests that the stock may be undervalued considering its growth prospects, which could justify Baird's increased price target. Moreover, Shopify's strong return over the last year, with a 54.33% price total return, indicates investor confidence in the company's performance and strategy.
While the article mentions increased marketing expenses, it's worth noting that Shopify operates with a moderate level of debt, according to another InvestingPro Tip. This financial flexibility could allow the company to invest in growth initiatives without overly compromising its financial health.
For investors seeking a more comprehensive analysis, InvestingPro offers 18 additional tips for Shopify, providing a deeper understanding of the company's financial position and market performance.
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