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RBC Capital reaffirms outperform on Shopify with $85 price target

Published 18/07/2024, 13:34
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On Thursday, RBC Capital reiterated its Outperform rating for Shopify (NYSE: NYSE:SHOP) with a steady price target of $85.00.

The firm's stance remains positive based on several indicators that suggest Shopify's second-quarter performance may slightly surpass market expectations. According to the latest third-party data, the number of Shopify Plus merchants remained unchanged from the previous quarter, which could mean a deceleration in the company's Monthly Recurring Revenue (MRR) growth, aligning with current consensus.

The U.S. Census data indicates that Shopify's Gross Merchandise Volume (GMV) for the second quarter could modestly beat consensus estimates. This slight uptick in GMV growth signals a potentially positive trend for the e-commerce platform's quarterly results. Additionally, a reduction in job postings by Shopify hints at the company's continued emphasis on cost discipline, which is anticipated to contribute to sequential margin growth, corroborating with consensus projections.

RBC Capital's analysis underscores the expectation that Shopify's disciplined cost management strategies will likely result in improved margins. The firm's unchanged price target of $85.00 reflects confidence in Shopify's business model and its ability to navigate the current economic environment effectively.

In other recent news, Shopify has been the subject of numerous analyst actions.

Wolfe Research initiated coverage on the company with an Outperform rating, citing Shopify's potential for market share expansion and profitability improvement. Meanwhile, Loop Capital maintained a Hold rating, highlighting a decline in sales trends and Merchant Solutions engagement. Baird reaffirmed its Outperform rating, noting strong performance in international markets and favorable e-commerce trends.

Evercore ISI upgraded Shopify from In Line to Outperform, recognizing the company's promising market position and potential for increased free cash flow margins. However, MoffettNathanson downgraded Shopify from Buy to Neutral due to valuation concerns.

In the realm of investments, ARK ETFs, managed by Cathie Wood, recently purchased shares in Shopify, reflecting a belief in the growth potential of online retail. These are among the latest developments for Shopify, a leader in the e-commerce industry.

Despite some firms expressing concerns over Shopify's valuation and a potential slowdown in growth, others maintain confidence in the company's financial prospects and market position. As Shopify prepares for its upcoming earnings release, investors will be keenly watching for further insights into the company's financial health and its ability to navigate the changing dynamics of the e-commerce industry.

InvestingPro Insights

As RBC Capital maintains its positive outlook on Shopify, it's worth noting that Shopify's financials and market performance also present a mixed picture. With a market capitalization of $83.59 billion, Shopify is a significant player in the e-commerce platform space. While the company's P/E ratio stands at a negative -395.15, indicating investor concerns over profitability, there are signs of future growth. Analysts are expecting net income growth this year, which aligns with RBC Capital's positive stance.

Shopify's revenue has shown a strong growth of 25.56% over the last twelve months as of Q1 2024, coupled with a gross profit margin of 50.65%, which may signal operational efficiency. Additionally, the company's liquid assets exceed its short-term obligations, suggesting financial stability in meeting its immediate liabilities. However, it's important to note that Shopify is trading at a high revenue valuation multiple, which could reflect investor optimism about the company's growth prospects.

Investors looking for deeper insights can find more InvestingPro Tips for Shopify, which highlight the company's position as a prominent player in the IT Services industry and its expected profitability this year. For those interested in exploring these insights further, InvestingPro offers additional tips on Shopify's financial health and stock performance. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and uncover the full range of expert analysis and tips available.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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