By Sam Boughedda
Shopify (NYSE:SHOP) was lifted to Buy from Neutral with a $56 price target at Roth Capital Partners on Monday based on more favorable comps and the e-commerce firm's recent pricing tier changes.
Shopify announced last week that its Basic plan will now cost $39 a month from $29, its Shopify plan will increase to $105 from $79, and its Advanced plan will rise to $399 from $299.
"We believe entering 2023, that the last of tough Covid comps are behind the Company. Second, while the Company is estimated to have more than tripled its revenue in just three years, we still project it can grow ~18% y/y in 2023 (on a much larger base), and we believe that could be closer to 20% (or better) with its new pricing tiers it announced last week.," said Roth Capital analysts.
In addition, the analysts argue that with the announcement of Shopify's new pricing tiers, they believe there could be a two-fold benefit.
"While average new monthly prices appear to be approximately 33% higher, annual plans are about on par with legacy pricing," explained analysts. "While we expect to see some revenue growth benefit from this new pricing tier structure later in '23, we think the more pronounced benefit will be a bigger portion of SHOP's merchants moving to an annual membership, which should improve revenue visibility, as well as potentially reduce merchant churn."
They conclude the note by stating that the firm believes that a premium for SHOP is warranted due to its market-leading position in e-commerce software.