Shopify Inc (TSX:SH., NYSE:SHOP) shares moved higher after the e-commerce platform was upgraded to ‘Outperform’ by Wedbush analysts.
The analysts, who boosted the stock from a ‘Neutral’ rating, also raised their price target on Shopify to $125 from $115.
Shopify shares gained 3.8% at about $113 on Monday afternoon.
Wedbush’s analysts are “more constructive on shares in the near-term” citing an improving margin outlook and expectations for strong operating income growth in 2025.
“The near-term margin outlook is becoming more attractive as the expense trajectory implied by management’s guidance for Q4 suggests continued operating leverage this year,” Wedbush wrote in a note to clients.
Third quarter operating income was 30% above the consensus and guidance for Q4 implies operating income of approximately $436 million, ahead of the consensus of $357 million, they noted.
“Ongoing margin improvement should alleviate investor concerns related to the required marketing intensity to support growth,” analysts wrote.
Wedbush also highlighted that while Shopify trades at a premium multiple when compared with its peer group, the company is positioned to grow its operating income at a 41% compound annual growth rate over the next five years, ahead of e-commerce peers.
They also see “significant pricing power” in Shopify’s subscription model that are not reflected in Street estimates which could be a source of intermediate-term upside.
“Shopify remains the dominant e-commerce software platform with a large total addressable market (TAM) opportunity, considerable pricing power within its subscription services, and ongoing payments expansion with expected gross payment volume (GPV) of $225 billion in 2025,” they wrote.
“With our outlook, we raised our estimates reflecting increased conviction in the company’s competitive positioning and ability to drive sustainable merchant growth as the leading provider of e-commerce software and payments solutions.”