Shopify Inc (NYSE:SHOP) shares sank on Wednesday after the maker of software that helps retailers set up and manage online stores forecast a bigger operating loss for the year, due to higher compensation expenses.
But brokers at Wedbush put stock in the firm and said Shopify "pulls away from the competition as growth stays high" and reiterated an Outperform and raised its share price target to $35.
"Revenue of $72.2mln (95% growth YoY) was much higher than consensus $66.9mln and our $67.9mln estimate," Wedbush said in a note.
The broker added that "channel and developer initiatives continue to extend Shopify's competitive lead," and that it was "raising 2016 revenue estimate to $345mln from $325mln based on strong results."
Some of that optimism may have also been formed on the fact that the New York-listed Canadian company also posted a smaller-than-expected loss for the first quarter as its revenue rose 3.6% from the preceding quarter, due to tie-ups with companies such as Facebook (NASDAQ:FB).
Shopify's US-listed shares, which have risen more than 80% since their IPO in May 2015, fell as much as 9% on Wednesday.
The company said it expects a bigger 2016 operating loss of $41mln-$47mln, compared with a previous forecast of $36mln-$42mln.
Analysts said shares were down on Wednesday because of profit-taking, or as investors offloaded some shares because they have become expensive.
Shopify shares closed down 3.7% at $29.61 on Wednesday.