On Thursday, RBC Capital adjusted its outlook on Shopify Inc (NYSE: NYSE:SHOP) shares, lowering the price target to $85 from the previous $100, while retaining an Outperform rating on the stock.
This adjustment comes as Shopify's shares experienced a significant decline of 19% today, prompted by the company's second-quarter guidance.
The guidance indicated expectations for lower margins due to new investments and a smaller revenue boost from Plus pricing increases than previously anticipated.
The RBC Capital analyst maintained a positive view on the company despite the lowered price target, citing Shopify's history of generating high returns on its investments. The analyst's comments suggest confidence in Shopify's ability to potentially accelerate growth through the fiscal year 2025.
The firm's assessment reflects a belief in the company's ongoing market traction and the likelihood of achieving operating leverage over time.
Shopify's second-quarter forecast has led to concerns among investors, as reflected in today's stock price drop. The company's anticipated new investments and the less robust revenue increase from Plus pricing have contributed to the expectation of tighter margins in the near term.
Despite this, the analyst's comments indicate an expectation that these investments will pay off in the long run.
The price target revision to $85 from $100 by RBC Capital highlights the immediate impact of Shopify's updated guidance on market perceptions. Nonetheless, the Outperform rating suggests that the firm remains optimistic about Shopify's long-term prospects and its ability to navigate the current challenges.
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