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Shopify (SHOP - Free Report) delivered a beat-and-raise holiday quarter on February 17 and then sold off a bit from all-time highs just below $1,500. Highlights were stunning revenue and gross merchandise growth of 94% and 99%, respectively.
Here was one typical bull response, that came within hours of the company report and conference call...
Shopify price target raised to $1,650 from $1,350 at KeyBanc: Analyst Josh Beck noted the quarter was driven by nearly 100% year-over-year GMV (gross merchandise value) growth and observed that merchant net additions of about 600,000 were equivalent to the entire 2017 merchant base. Beck sees "significant growth opportunities" ahead in a giant TAM (total addressable market).
We'll talk about that TAM and hear from other analysts right after we cover a few other details.
SHOP shares plunged initially on the "priced-to-perfection" quarter, but then recovered from a -9% intra-day loss to just -3%. That tells us the bulls are still in charge here, even at 40X forward sales of over $4 billion -- because those sales are growing at over 30%.
Another factor driving my interest and investment in Shopify is smart, systematic long-term investors like Baillie Gifford of the UK, who kept adding to their sizable stake in Q4. Now holding 5.7 million shares of SHOP, they are nearly tied with Fidelity as the biggest investors, along with Capital World.
Last week, I did a little dive into the "13Fs of Bulls" and, of course, featured SHOP as a key pony in the stable...
And another thing making SHOP shares more attractive as they dip below $1,300 this week -- besides the Nasdaq slide -- is a bit of dilution. SHOP lobbed out 1.18 million new shares at $1,315 to raise $1.55 billion in a secondary offering of Class A subordinate voting shares.
So far, it looks like the institutions who grabbed some of the offering are going to hang on for higher levels. Better to be well long near $1,300 than over $1,500 where I think the stock goes to new highs this year.
The E-Comm TAM: How Big, How Fast?
The reason SHOP investors will keep paying 35-40X sales is because of that commanding growth in a giant TAM, where online merchants want alternatives to dealing with Amazon or running all the e-comm infrastructure themselves.
According to eMarketer, retail e-commerce is still only about 15% of total global retail sales. But it is growing at 15% per year and Statista is tracking data projecting the pie will expand from $5 trillion this year to $6.5 trillion in 2023.
Some researchers think these estimates of TAM and growth are already too conservative. Especially since the global pandemic just accelerated e-commerce trends and digital demands by 10 years in 10 months, according to a survey done by Twilio last autumn.
This would be a problem if there were big technology bottlenecks and the web wasn't ready for massive traffic growth. But web and cloud infrastructure were already in massive innovation cycles and the competition among big-data vendors has been a dream come true for e-marketers.
And it's all just in time for the 5G mobile revolution that is bringing information and products to anyone, anywhere, faster than ever.
Meet the Lil' Big SHOP
This is why I'm also an investor in a little up-and-coming e-comm platform called BigCommerce (BIGC - Free Report) . They don't offer all the bells and whistles for your online store like Shopify. Instead, they create a behind-the-scenes environment for your store where you can integrate with hundreds of other tools and platforms.
They called their model "Open SaaS" and it has attracted the likes of Ben&Jerry's and Skullcandy. The flexibility of the BIGC platform allows entrepreneurs, designers, programmers, and marketers to custom-build their online presence on a secure, reliable technology base.
BIGC also just delivered a strong beat-and-raise quarter on 2/22. Better yet, on Wednesday they announced a new partnership with Walmart that will enable its eligible US merchants to sell products directly on Walmart Marketplace, giving them access to the more than 120 million unique consumers visiting Walmart.com each month.
BigCommerce merchants looking to sell through Walmart.com will also receive an expedited application review to get up and running on the marketplace quickly, and for a limited time, Walmart will offer $0 commission rates to new platform sellers.
If this deal isn't proof that this sub-$5 billion enterprise has serious technology chops for e-comm, I don't know what is.
Analysts Catch Up to the SHOP
Shopify's outlook for 2021 was upfront and realistic in the sense they knew that this year could not be a repeat of 2020 which saw a mass pandemic-driven migration to the their merchant solutions. For this reason as well, the company will no longer provide financial targets for growth guidance.
So it's really about the company's sustained execution with the big new customer rolls, which should keep growth steady in the expanding TAM-licious pie they are selling into. How could they compare anything going forward to the year that just was?
I'm going to share more analyst reactions from last week to the recent SHOP quarter and management commentary, so you can see how they are valuing the enterprise going forward.
Goldman Sachs analyst Christopher Merwin couldn't be outdone by Josh Beck at KeyBanc, so he raised his price target on Shopify the next day by $30 more to $1,680 (from $1,323) noting a "strong finish to a transformative year," as gross merchandise volume grew ~100% and total revenue came in 7% ahead. It's also worth noting that Goldman was a lead underwriter of the $1.55 billion secondary a few days later.
Wells Fargo analyst Timothy Willi raised his SHOP price target to $1,550 from $1,000, and kept an Equal Weight rating on the shares. Willi noted that Shopify continued to execute on multiple fronts in Q4, including international expansion, and with the shift toward e-commerce and omni-channel sales providing an underlying tailwind, new product launches and platform functionality should provide momentum heading into 2021.
Despite this business momentum, however, the analyst believes Shopify has become "a victim of its own success" from a growth standpoint, as it faces challenging comps in 2021, while trading at a significant premium to its peer group.
Oppenheimer analyst Brian Schwartz raised his price target on Shopify to $1,500 from $1,300 and reiterated an Outperform rating on the shares. Schwartz highlighted the strong merchant solutions revenue growth, robust net new merchant additions, and good cost management as operational efficiencies. But since management is no longer providing financial targets for guidance, he finds that a negative for predictability.
Longer-term, Schwartz continues to believe Shopify is a "generational technology disruptor in a large and underpenetrated digital commerce opportunity that has been catalyzed by the COVID-19 pandemic."
RBC Capital analyst Paul Treiber raised his SHOP target to $1,500 from $1,290, citing the company's better than expected Q4 results and an "unpenetrated" TAM opportunity, along with its increasing scale. Treiber is also boosting his FY21 EPS view by 32c to $4.24 while noting Shopify's "sustainable" moat and the growing probability of monetizing its new valued-added services.
Truist analyst Terry Tillman raised his price target on Shopify to $1,475 from $1,100 but kept a Hold rating on the shares, observing that the company reported a noteworthy Q4 earnings beat with "strong upside" in its metrics. He added that Shopify is positioned for continued strong growth, but he stays at neutral due to valuation.
Bottom line on SHOP: Analysts are exhausted trying to keep up with the growth and the demand for shares. So they threw in the towel on their price targets and hope their clients can get out above $1,300. Meanwhile, I think smart, long-term investors will be buying every dip into the $1,200 handle.
Disclosure: I own shares of SHOP and BIGC for the Zacks TAZR Trader portfolio.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Image: Bigstock
Bull of the Day: Shopify (SHOP)
Shopify (SHOP - Free Report) delivered a beat-and-raise holiday quarter on February 17 and then sold off a bit from all-time highs just below $1,500. Highlights were stunning revenue and gross merchandise growth of 94% and 99%, respectively.
Here was one typical bull response, that came within hours of the company report and conference call...
Shopify price target raised to $1,650 from $1,350 at KeyBanc: Analyst Josh Beck noted the quarter was driven by nearly 100% year-over-year GMV (gross merchandise value) growth and observed that merchant net additions of about 600,000 were equivalent to the entire 2017 merchant base. Beck sees "significant growth opportunities" ahead in a giant TAM (total addressable market).
We'll talk about that TAM and hear from other analysts right after we cover a few other details.
SHOP shares plunged initially on the "priced-to-perfection" quarter, but then recovered from a -9% intra-day loss to just -3%. That tells us the bulls are still in charge here, even at 40X forward sales of over $4 billion -- because those sales are growing at over 30%.
Another factor driving my interest and investment in Shopify is smart, systematic long-term investors like Baillie Gifford of the UK, who kept adding to their sizable stake in Q4. Now holding 5.7 million shares of SHOP, they are nearly tied with Fidelity as the biggest investors, along with Capital World.
Last week, I did a little dive into the "13Fs of Bulls" and, of course, featured SHOP as a key pony in the stable...
Hedge Fund Diaries: Who Was Buying Your Stocks?
And another thing making SHOP shares more attractive as they dip below $1,300 this week -- besides the Nasdaq slide -- is a bit of dilution. SHOP lobbed out 1.18 million new shares at $1,315 to raise $1.55 billion in a secondary offering of Class A subordinate voting shares.
So far, it looks like the institutions who grabbed some of the offering are going to hang on for higher levels. Better to be well long near $1,300 than over $1,500 where I think the stock goes to new highs this year.
The E-Comm TAM: How Big, How Fast?
The reason SHOP investors will keep paying 35-40X sales is because of that commanding growth in a giant TAM, where online merchants want alternatives to dealing with Amazon or running all the e-comm infrastructure themselves.
According to eMarketer, retail e-commerce is still only about 15% of total global retail sales. But it is growing at 15% per year and Statista is tracking data projecting the pie will expand from $5 trillion this year to $6.5 trillion in 2023.
Some researchers think these estimates of TAM and growth are already too conservative. Especially since the global pandemic just accelerated e-commerce trends and digital demands by 10 years in 10 months, according to a survey done by Twilio last autumn.
This would be a problem if there were big technology bottlenecks and the web wasn't ready for massive traffic growth. But web and cloud infrastructure were already in massive innovation cycles and the competition among big-data vendors has been a dream come true for e-marketers.
And it's all just in time for the 5G mobile revolution that is bringing information and products to anyone, anywhere, faster than ever.
Meet the Lil' Big SHOP
This is why I'm also an investor in a little up-and-coming e-comm platform called BigCommerce (BIGC - Free Report) . They don't offer all the bells and whistles for your online store like Shopify. Instead, they create a behind-the-scenes environment for your store where you can integrate with hundreds of other tools and platforms.
They called their model "Open SaaS" and it has attracted the likes of Ben&Jerry's and Skullcandy. The flexibility of the BIGC platform allows entrepreneurs, designers, programmers, and marketers to custom-build their online presence on a secure, reliable technology base.
BIGC also just delivered a strong beat-and-raise quarter on 2/22. Better yet, on Wednesday they announced a new partnership with Walmart that will enable its eligible US merchants to sell products directly on Walmart Marketplace, giving them access to the more than 120 million unique consumers visiting Walmart.com each month.
BigCommerce merchants looking to sell through Walmart.com will also receive an expedited application review to get up and running on the marketplace quickly, and for a limited time, Walmart will offer $0 commission rates to new platform sellers.
If this deal isn't proof that this sub-$5 billion enterprise has serious technology chops for e-comm, I don't know what is.
Analysts Catch Up to the SHOP
Shopify's outlook for 2021 was upfront and realistic in the sense they knew that this year could not be a repeat of 2020 which saw a mass pandemic-driven migration to the their merchant solutions. For this reason as well, the company will no longer provide financial targets for growth guidance.
So it's really about the company's sustained execution with the big new customer rolls, which should keep growth steady in the expanding TAM-licious pie they are selling into. How could they compare anything going forward to the year that just was?
I'm going to share more analyst reactions from last week to the recent SHOP quarter and management commentary, so you can see how they are valuing the enterprise going forward.
Goldman Sachs analyst Christopher Merwin couldn't be outdone by Josh Beck at KeyBanc, so he raised his price target on Shopify the next day by $30 more to $1,680 (from $1,323) noting a "strong finish to a transformative year," as gross merchandise volume grew ~100% and total revenue came in 7% ahead. It's also worth noting that Goldman was a lead underwriter of the $1.55 billion secondary a few days later.
Wells Fargo analyst Timothy Willi raised his SHOP price target to $1,550 from $1,000, and kept an Equal Weight rating on the shares. Willi noted that Shopify continued to execute on multiple fronts in Q4, including international expansion, and with the shift toward e-commerce and omni-channel sales providing an underlying tailwind, new product launches and platform functionality should provide momentum heading into 2021.
Despite this business momentum, however, the analyst believes Shopify has become "a victim of its own success" from a growth standpoint, as it faces challenging comps in 2021, while trading at a significant premium to its peer group.
Oppenheimer analyst Brian Schwartz raised his price target on Shopify to $1,500 from $1,300 and reiterated an Outperform rating on the shares. Schwartz highlighted the strong merchant solutions revenue growth, robust net new merchant additions, and good cost management as operational efficiencies. But since management is no longer providing financial targets for guidance, he finds that a negative for predictability.
Longer-term, Schwartz continues to believe Shopify is a "generational technology disruptor in a large and underpenetrated digital commerce opportunity that has been catalyzed by the COVID-19 pandemic."
RBC Capital analyst Paul Treiber raised his SHOP target to $1,500 from $1,290, citing the company's better than expected Q4 results and an "unpenetrated" TAM opportunity, along with its increasing scale. Treiber is also boosting his FY21 EPS view by 32c to $4.24 while noting Shopify's "sustainable" moat and the growing probability of monetizing its new valued-added services.
Truist analyst Terry Tillman raised his price target on Shopify to $1,475 from $1,100 but kept a Hold rating on the shares, observing that the company reported a noteworthy Q4 earnings beat with "strong upside" in its metrics. He added that Shopify is positioned for continued strong growth, but he stays at neutral due to valuation.
Bottom line on SHOP: Analysts are exhausted trying to keep up with the growth and the demand for shares. So they threw in the towel on their price targets and hope their clients can get out above $1,300. Meanwhile, I think smart, long-term investors will be buying every dip into the $1,200 handle.
Disclosure: I own shares of SHOP and BIGC for the Zacks TAZR Trader portfolio.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>