Bank of America analysts upgraded Shopify (NYSE:) to Buy and raised their price target on the stock to $82 from $78 in a note Tuesday, citing solid growth and free cash flow (FCF) conversion.
The bank said that under new CFO Jeff Hoffmeister, Shopify has made progress toward achieving balanced growth and margin improvements.
Analysts forecast strong revenue growth driven by low-single-digit e-commerce growth, consistent market share gains and disciplined expense management.
Additionally, they note that Shopify’s gross merchandise volume (GMV) has consistently outpaced e-commerce growth, with a compound annual growth rate (CAGR) of +25% over the past three years, more than double the industry rate.
By 2023, Shopify captured a 4.9% share of the global ecommerce market, up from 1.2% in 2017. The company attributes this growth to Shopify’s competitive advantages, including a strong installed base of 2.5 million merchants, a comprehensive ecosystem of over 2,500 partners and over 8,000 apps, and a platform that integrates ecommerce and payments.
Looking ahead, analysts project Shopify’s operating margin to rise to 17.4% by fiscal 2026, up from 14.3% in fiscal 2024. They also expect a normalized product mix and stable gross margins after years of decline.
Additionally, Shopify’s commitment to “disciplined and limited headcount growth” is expected to improve operating leverage. Under an upside scenario, the company estimates fiscal 2030 revenue to reach $29.4 billion (+22% CAGR) and free cash flow to reach $8.0 billion (+33% CAGR).
The revised target price of $82 suggests a return potential of 28%.
While not directly related to Q2 results, analysts note that Shopify is well positioned to capture a larger share of the e-commerce market by achieving better scale and FCF conversion. The new warrant is based on 56x FCF for FY25, reflecting a premium to large-cap peers due to Shopify’s longer track record for sustained FCF growth.
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