Shopify (TSE:SHOP) Rises despite a Likely Downturn in Canadian Retail
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Shopify (TSE:SHOP) Rises despite a Likely Downturn in Canadian Retail

Story Highlights

Shopify gains despite a souring in Canadian retail markets. But its connections beyond Canada are likely to prove helpful going forward.

There’s good news and bad news for the Canadian retail market right now. While there are signs of easing from the Bank of Canada in terms of interest rates, inflationary pressures have hit consumers hard. The latest word out of the Canadian retail sector notes that sales are down, and down sufficiently to pretty much wash out April’s gains. However, this isn’t having a lot of impact on e-commerce giant Shopify (TSE:SHOP) (NYSE:SHOP), at least not yet. Shopify shares are up fractionally in Friday morning’s trading.

The Canadian consumer is weak right now, and that has prompted the Bank of Canada to keep the potential for more rate cuts in play just to prevent the whole thing from toppling. About the only sector that saw any kind of increase was gasoline, which was likely connected to rising prices and comparatively inelastic demand. Car sales, meanwhile, saw the largest drop overall.

Insulating Against a Downturn

This, of course, does Shopify no favors. But thankfully, since Shopify is focused on online shopping and serves international markets, it’s a little more insulated from the downturns of individual economies. In addition, according to Evercore analyst Mark Mahaney, Shopify’s recent connections to major brands are giving it a boost sufficient enough for him to upgrade Shopify stock to Outperform with a $75 per share price target.

Shopify made its name on small to mid-sized businesses (SMB), but now, it’s making a play for big-name brands too. It’s having some success there, and that, coupled with its already solid appeal with the SMB crowd, makes it a formidable prospect. Everybody’s basket may be losing steam, but if you add more baskets, you make up that loss. Sometimes, you make it up, and then some.

Is Shopify a Buy, Sell, or Hold?

Turning to Wall Street, analysts have a Moderate Buy consensus rating on SHOP stock based on 17 Buys and 14 Holds assigned in the past three months, as indicated by the graphic below. After a 5.4% rally in its share price over the past year, the average SHOP price target of C$105.17 per share implies 19.42% upside potential.


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