Bank of America upgraded Shopify (NYSE:SHOP) to a Buy rating from Neutral and hiked its price objective to $82.
Analyst Brad Sills said that following years of declining margin for Shopify (SHOP), the firm thinks the corner has been turned in terms of balanced growth and margin, under new CFO Jeff Hoffmeister. “We forecast solid revenue growth and FCF conversion from here, driven by 1) solid high single-digit baseline eCommerce growth, 2) steady share gains, and 3) disciplined expense spending,” updated the BofA team.
The bull case from BofA on Shopify (SHOP) is that the e-commerce giant is likely to continue to consolidate the vast small business market of 5.2 million businesses in the U.S. alone, driven by growing awareness of its market leadership with a number of defensible competitive advantages. With the stock trading in line with the large software group on an EV/sales basis, the firm looks for continued traction with new merchant solutions, such as Shopify app, Audiences, Capital, and POS to drive GMV monetization and higher operating margins.
Shopify (SHOP) broke 3.55% higher in premarket trading on Tuesday following the BofA ratings lift. Shopify (SHOP) is lined up to report Q2 earnings on July 26. 22 out of 27 of the last EPS revisions from analysts have been on the downward side.