NFB - cantechletter.comUndoing a mistake from the past?, logistics, article
By Staff Filed under: All posts, Analysts, eCommerce Stock: shop Market mover Shopify wins bullish new target at National Bank
Fresh off one of its biggest days ever in the market, one of Canada’s best known companies has some more good news to digest.
Shopify (Shopify Stock Quote, Charts, News, Analysts, Financials NYSE:SHOP) just received a target raise from analyst Richard Tse of National Bank Financial. In a report to clients on Thursday, Tse reiterated an “Outperform” rating on SHOP while moving his target price from $60 to $80 per share, saying the e-commerce company is now playing to its strengths.
Shopify shares shot up in trading on Thursday after the release of both its first quarter 2023 financials and a couple of news items from the company. On the latter, Shopify said it was undergoing further restructuring and trimming 20 per cent of its workforce and it announced a definitive agreement to sell its logistics business, one which it had spent years developing. Shopify said private company Flexport will take over its fulfillment network, while SHOP will receive a 13 per cent stake in Flexport.
Commenting on the moves, Tse said he’s viewing them as a positive.
“When it comes to Shopify Fulfillment Network, the Logistics divestiture lifts what had been an increasing financial and operating burden to scale, and while potentially positive to driving value, it was margin dilutive,” Tse wrote.
“At the same time, we see the divestiture and overall headcount restructuring reflecting more discipline to capital allocation in what had been a growing concern around a growth-at-all-cost approach. In our view, the combined notable pivots will undoubtedly have a positive valuation re-rating impact for SHOP,” he said.
On the quarterly financials, Shopify delivered revenue growth of 25 per cent year-over-year to $1,508 million, which was a beat of the consensus expectation at $1,430 million but under Tse’s call at $1,549 million. Adjusted EPS of $0.01 per share was better than both the Street’s estimate at negative $0.04 and Tse’s at negative $0.03 per share. (All figures in US dollars.)
Tse said Shopify showed strong year-over-year growth in Merchant Services revenue at $1,126 million, up 31 per cent and driven by a combination of a 15 per cent increase in gross merchandise volume and an expanding take rate of 2.27 per cent, up eight basis points sequentially and up 28 bps year-over-year.
Looking ahead, Tse is forecasting Shopify’s revenue going from $5,599.9 million in 2022 to $6,325.3 million in 2023 and to $7,035.1 million in 2024. Adjusted EPS is forecasted to go from $0.04 in 2022 to $0.15 in 2023 and to $0.28 per share in 2024.
“We continue to believe Shopify is in the early stages of a market that’s structurally changing. We believe Shopify remains a leading on and offline Commerce disruptor and believe upside in the stock will come from a number of different incremental growth drivers such as: 1) International; 2) increased take rate with new services; 3) large enterprise (Shopify Plus); and now 4) POS for SMB retail,” Tse said.