Expectations Rising As Investors Start To Appreciate Shopify's True Potential

Shopify Inc (US) (NYSE: SHOP), the Canadian-based company that is quietly powering the e-commerce revolution, has seen its stock gain more than 60 percent since the start of 2017, but analysts at BTIG see further gains ahead.

In a research report on Tuesday, BTIG's Abhinav Kapur maintains a Buy rating with a price target raised to $75 from a previous $65.

'Perfect Product/Market Fit'

Kapur suggested in his report that Shopify's surge this year should be seen as the "natural outcome" of a company achieving a "perfect product/market fit." The analyst emphasized the fact that growth in digital commerce is a long-term secular trend and no other company "makes it easier to participate" in e-commerce than Shopify.

In fact, Kapur believes Shopify is merely in its early stages of growth and it can sustain a long-term trajectory. Granted, the stock could have gotten ahead of itself or expectations are too lofty, but the analyst argued investors are now appreciated the company's true potential and a valuation of 7x EV/FY 2018 revenue is appropriate.

Kapur also suggested that the Street's current expectations may prove to be conservative given: 1) the company's single-digit SMB (small- and medium-size business) merchant penetration, 2) a quickly ramping up-market initiative and 3) new variable pricing for high performing merchants.

Bottom line, Shopify's outlook is a "Goldilocks scenario" and the stock will likely see continued outperformance.

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Image Credit: By Shopify Inc. (https://press.shopify.com/) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons