On Thursday, Citi adjusted its price target for Shopify (NYSE: NYSE:) shares, a leading e-commerce platform, reducing it to $90 from the previous $97, while continuing to endorse the stock with a Buy rating. The new target reflects Citi’s analysis of the company’s performance and market conditions.
Shopify’s second-quarter results have positively impacted the market’s view, particularly regarding revenue and earnings. The company’s performance was notable given the erratic macroeconomic climate and consumer spending patterns.
Shopify’s success is attributed to several factors, including acquiring new merchants, market share gains, including in the upmarket and B2B sectors, same-store sales growth, and increased penetration of payment processing in its Gross Merchandise Volume (GMV).
The company’s operating margin outperformed expectations by approximately 280 basis points, which was highlighted as a key positive takeaway for investors. This indicates Shopify’s efficient return on sales and marketing expenditure.
The forecast for the third quarter suggests an Earnings Before Interest and Taxes (EBIT) approximately 25% higher than the market consensus, driven by a resurgence in top-line growth and leveling operating expenses.
Citi anticipates that the second half of the year and the outlook for 2025 will see upward revisions, enhancing investor sentiment towards Shopify’s stock.
The firm projects a significant inflection point in profitability for Shopify in 2025, with estimated EBIT growth of around 60% year-over-year, surpassing the general consensus of approximately 43%.
In summary, Citi’s revised price target of $90 is based on higher estimates for the outer years and updated regression inputs. Yet, the firm maintains its Buy rating and includes Shopify on its Focus List, suggesting continued confidence in the stock’s performance.
In other recent news, Shopify has reported a significant 25% year-over-year revenue growth for the second quarter of 2024, excluding logistics. This growth accompanies a notable increase in the company’s gross profit and a doubling of its free cash flow margin to 16%.
Furthermore, the company’s operating expenses have decreased compared to the previous quarter, marking the fourth consecutive quarter of profitability for Shopify.
Morgan Stanley has demonstrated confidence in Shopify’s future financial performance by raising the company’s price target to $85, up from $80, while maintaining an Overweight rating on the…
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