Shopify Inc (SHOP)

[conix]

Is Shopify (NYSE: SHOP) Still A Buy At $1,000?

MONDAY, NOVEMBER 23, 2020 | SAM QUIRKE

Is Shopify (NYSE: SHOP) Still A Buy At $1,000?Back at the start of 2020, few on Wall Street could have imagined that shares of Canadian e-commerce giant Shopify (NYSE: SHOP) would be trading above $1,000 by the time Q4 rolled around. To be sure, they were on an upward trajectory that made the eventuality almost a certainty but having only popped above $500 for the first time in February, it was still going to be a tall order.

Then came COVID and for a few dark weeks in March, even the most optimistic bulls had to concede that they’d be lucky to finish the year flat after a 40% drop. But the stock market is a funny thing and investors are even funnier. As the effects of the pandemic rolled over the economy, they realized the massive upside potential that was suddenly in play for any stock that had e-commerce in its description. Amazon (NASDAQ: AMZN), Alibaba (NYSE: BABA), and Wayfair (NYSE: W) all caught strong bids into the start of April and Shopify was no different. Their cloud hosted platform allows individual, typically independent, retailers to create online stores out of the box. And with more people than ever before suddenly forced to shop online, it’s not surprising that demand for the services exploded.

But since crossing the $1,000 mark for the first time in July, shares have been relatively range bound and appear to be consolidating at a new normal. With hopes increasing for a COVID vaccine to become widely available by the middle of next year, what kind of upside potential remains for an e-commerce company that’s almost tripled its market cap this year already?


Fresh Upside Identified

If the moves of the big boys on Wall Street are any indication, then there’s a ton of reasons to be excited about where Shopify could go in 2021. Both Tudor Investment and Lone Pine Capital reported increased stakes in shares of Shopify in their 13F filings this month. Having rode the wave this summer, they’re bullish on the upward momentum sticking around for a while yet.

And late last week, Jefferies were out with an upgrade to Shopify shares, moving them from Hold to a Buy rating. In a note to clients they said “we have a greater appreciation for Shopify’s ability to deliver robust growth for the next several years and reach ~$10B of revenue in 2025 powered by a structural pull forward in e-commerce activity and better monetization of gross margin value."

This is exactly the kind of fresh outside momentum investors would be looking for in an e-commerce company as we head into the busiest season of the year for retailers. The company’s President Harley Finkelstein spoke to this point last week when he observed how much consumer habits have changed in the past year. On the whole, he believes the coronavirus pandemic has catapulted the e-commerce industry 10 years ahead of where it was expecting to be, and this acceleration is only going to increase through the end of the year.

Almost 100% Revenue Growth

In terms of internal momentum, we need only look at the company’s most recent earnings report, released at the end of October, to see just how hot that is right now. Aside from knocking analyst expectations out of the park, revenue was up more than 96% year on year and expectations will be equally high for the holiday season to deliver another knockout report in January.

For investors thinking about getting involved, shares are just starting to move up off solid support at the $900 level and look set for a re-test of the upper $1,120 mark as an initial target. The recent bullish comments from Wall Street heavyweights and the beginning of the biggest retail season of the year should be more than enough to send them to fresh highs before 2021 rolls around.