stock has been hit hard during the recent technology sale. William Blair analyst Matthew Pfau says it is a buying opportunity
In a note on Wednesday, Pfau upgraded Shopify (ticker: SHOP) to an Outperform from Market Perform, saying the Canadian e-commerce giant has the potential to increase revenue by about 30% over the next many years.
Shopify stock has fallen about 34% from its peak in mid-November and has fallen 2% over the past 12 months. For comparison
has increased 16% in the same period.
But Pfau said the stock has plenty of growth handles left, including corporate, international and take-rate. “Given this dynamic, we believe that Shopify can increase its revenue more than double the growth rate of e-commerce over the next many years, which in our opinion results in a growth of 30% plus in a bull-case scenario.
This revenue growth, combined with maintaining a premium rating, should cause stocks to surpass the overall market and SaaS [Software as a service] space, ”wrote the analyst.
Pfau also highlighted Shopify’s investment in products such as points of sale, shipping / fulfillment and social trade, which have the potential to be “material” growth drivers in the long run.
However, he warned that there could be further disadvantages: the stock is trading at a high valuation of 24 times, even though it is already down from the banks’ estimate 36 times.
Other risks include further compression of multiples in the SaaS space, growth in e-commerce is coming below analysts’ expectations of low teens over the next many years, and Omicron could potentially create a short-term headwind for e-commerce sales.
“While it’s hard to say where the bottom is in the short term and the stock is still not cheap by any means, we believe in the long term that Shopify should be able to maintain a premium rating given its growth prospects, good execution and dominance in the e-commerce software SaaS space, ”wrote Pfau.
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