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Shopify Inc. (SHOP - Free Report) is a $5.3 billion provider of a cloud-based commerce platform to small businesses. The Ottawa-based company's platform offers merchants tools to design, set up and manage their stores through web, mobile, social media, brick-and-mortar locations and pop-up shops.
The business model is exciting and liberating for many entrepreneurs who have sought an alternative to the ecommerce options offered by retail giant Amazon (AMZN - Free Report) .
And Wall Street analysts love the growth story here, especially after an early January partnership with the "retail rainforest." Shares of Shopify are up nearly 60% since a January 5 announcement that Shopify merchants could add the Amazon sales channel to their Shopify account.
This previously announced integration, which began in 2015 and was made generally available in December, was designed to seamlessly connect Shopify store owners to the millions of customers searching for products to buy on Amazon.
Now Shopify merchants can conveniently manage their product catalog for their ecommerce website, retail store, Amazon store, and other sales channels all in one place.
And this Amazon alliance now complements Shopify's existing partnership with Facebook . After the close of the third quarter, the company announced the integration of Shopify within Facebook Messenger to enable merchants to sell their products. Over 30,000 merchants have integrated Facebook Messenger with their store.
Price Targets Up, Earnings Estimates Down
But while investment banks are busy raising their price targets on SHOP shares, they've also been steadily lowering their profit projections on the company. Since the company's Q4 report on February 15, the Zacks Consensus Estimate for the current year widened to a loss of 73 cents compared with a loss of 40 cents.
And 2018 full-year "profit" projections cascaded nearly 5 times from a loss of 13 cents to a loss of 60 cents per share.
The drops reflect higher operating losses projected by Shopify management for 2017. The company expects to post operating losses in the range of $18-$22 million compared with $0.8 million reported in 2016.
And this is mostly the result of expansion as Shopify’s aggressive investment plans for 2017 are expected to hurt profitability. Management plans to add partners as well as merchants throughout the year. Employee hiring is also expected to double compared with 2016.
Favorite Growth Name
On February 16, Wedbush analyst Aaron Turner reiterated an Outperform rating on SHOP and raised his price target to $75 from $50, as the company reported 2016 fourth revenue well above expectations. Here's what the analyst had to say...
"We expect Shopify to continue to grow at above-ecommerce market growth rates for the foreseeable future as it continues to penetrate its sizable small and medium-sized business TAM (total addressable market) and makes in-roads with larger brands. FY16 ends on a high note. Q4 results topped expectations as revenue grew 86% YoY to $130.4 million coming in well ahead of both consensus of $121.6 million and the guidance range of $120-$122 million. Revenue growth was driven by strong execution across the board."
And on March 21, two more i-banks joined the shopping party and raised their price targets. BTIG analysts bumped theirs to $75 while the crew at Pacific Crest moved to $78 calling SHOP their "Favorite Growth Name to Own."
I like the Shopify business model and its partnership with key ecommerce institutions like Amazon and Facebook. But until the earnings estimates stop going down and start going back up, the stock has run too far and too high to touch. Keep your eye on the Zacks Rank for a better opportunity.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Bear of the Day: Shopify (SHOP)
Shopify Inc. (SHOP - Free Report) is a $5.3 billion provider of a cloud-based commerce platform to small businesses. The Ottawa-based company's platform offers merchants tools to design, set up and manage their stores through web, mobile, social media, brick-and-mortar locations and pop-up shops.
The business model is exciting and liberating for many entrepreneurs who have sought an alternative to the ecommerce options offered by retail giant Amazon (AMZN - Free Report) .
And Wall Street analysts love the growth story here, especially after an early January partnership with the "retail rainforest." Shares of Shopify are up nearly 60% since a January 5 announcement that Shopify merchants could add the Amazon sales channel to their Shopify account.
This previously announced integration, which began in 2015 and was made generally available in December, was designed to seamlessly connect Shopify store owners to the millions of customers searching for products to buy on Amazon.
Now Shopify merchants can conveniently manage their product catalog for their ecommerce website, retail store, Amazon store, and other sales channels all in one place.
And this Amazon alliance now complements Shopify's existing partnership with Facebook . After the close of the third quarter, the company announced the integration of Shopify within Facebook Messenger to enable merchants to sell their products. Over 30,000 merchants have integrated Facebook Messenger with their store.
Price Targets Up, Earnings Estimates Down
But while investment banks are busy raising their price targets on SHOP shares, they've also been steadily lowering their profit projections on the company. Since the company's Q4 report on February 15, the Zacks Consensus Estimate for the current year widened to a loss of 73 cents compared with a loss of 40 cents.
And 2018 full-year "profit" projections cascaded nearly 5 times from a loss of 13 cents to a loss of 60 cents per share.
The drops reflect higher operating losses projected by Shopify management for 2017. The company expects to post operating losses in the range of $18-$22 million compared with $0.8 million reported in 2016.
And this is mostly the result of expansion as Shopify’s aggressive investment plans for 2017 are expected to hurt profitability. Management plans to add partners as well as merchants throughout the year. Employee hiring is also expected to double compared with 2016.
Favorite Growth Name
On February 16, Wedbush analyst Aaron Turner reiterated an Outperform rating on SHOP and raised his price target to $75 from $50, as the company reported 2016 fourth revenue well above expectations. Here's what the analyst had to say...
"We expect Shopify to continue to grow at above-ecommerce market growth rates for the foreseeable future as it continues to penetrate its sizable small and medium-sized business TAM (total addressable market) and makes in-roads with larger brands. FY16 ends on a high note. Q4 results topped expectations as revenue grew 86% YoY to $130.4 million coming in well ahead of both consensus of $121.6 million and the guidance range of $120-$122 million. Revenue growth was driven by strong execution across the board."
And on March 21, two more i-banks joined the shopping party and raised their price targets. BTIG analysts bumped theirs to $75 while the crew at Pacific Crest moved to $78 calling SHOP their "Favorite Growth Name to Own."
I like the Shopify business model and its partnership with key ecommerce institutions like Amazon and Facebook. But until the earnings estimates stop going down and start going back up, the stock has run too far and too high to touch. Keep your eye on the Zacks Rank for a better opportunity.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>