Goldman Turns Bullish On Shopify Ahead Of 2Q Earnings

Goldman Sachs upgraded Shopify (SHOP) to Buy from Hold, saying the demand for online services serves as a long-term catalyst. Merwin reiterated his $1,127 (15.4% upside potential) price target on the stock .

Goldman analyst Christopher Merwin believes that Shopify will benefit from the e-commerce wave, which “would provide sustained tailwind to SHOP’s gross merchandise volume (GMV) growth and by extension its merchant solutions revenue.”

US e-commerce revenue is expected to grow by 29% this year, up from a previous forecast of 15%, according Goldman estimates. Merwin noted that “following global shelter-in-place orders in response to COVID-19, e-commerce penetration went from 16% of retail spending in the US in 1Q20 to 40% in May.”

The analyst acknowledged having “missed a significant run up in SHOP shares (up 140% in the YTD)”, but also believes that “SHOP should be able to sustain hyper-growth for longer than the market expects.”

“SHOP has one of the largest TAMs [total addressable market] in software, which we measure at $200 billion globally,” Mervin added.

Shopify will announce its 2Q earnings on July 29 and the Wall Street analyst consensus expects the e-commerce giant to post $513.8 million in revenues.

Currently, the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 9 Buys, 14 Holds and 1 Sell. The average price target of $932.10 implies downside potential of 5.5%. (See SHOP stock analysis on TipRanks).

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