Shopify Stock Has 16% Upside, According to One Wall Street Analyst

Beyer & Co.(Baird)Analyst Colin Sebastian said.Shopify(New York Stock ExchangeStock Code(SHOP)has delivered at least 20% of revenue growth in consecutive quarters, but there are still some catalysts that could move the company's stock higher.

Sebastian maintains an Outperform rating on the stock, but raises his price target from $85 to $87 per share. Wall Street's short-term price target is of little use to long-term investors, but the reasons behind it are revealing. In this case, Shopify may be seeing strong momentum in the growth of the number of active merchants on its platform, which could benefit its growth and stock price.

Why Wall Street Analysts Are Bullish on Shopify

The Baird analysts cited their firm's e-commerce platform research, which suggests that Shopify should see a modest increase in net active store count. Specifically, the firm noted that this could reflect the benefits of the Shopify Plus subscription program, as well as international and business-to-business opportunities.

Shopify had a strong year with revenue growth of 231 TP3T year-over-year, capping off a stellar 2023. Analysts agree that the company's revenue will grow another 21% in 2024.

Shopify's operating profits also soared last year after it sold its logistics business. However, Shopify recently raised the price of its Plus subscription tier, which could give the company another boost.

Management also believes that its new business-to-business products will be a major growth driver, tapping into a $450 billion market.

Is the stock worth buying?

Prospects for earnings growth have pushed the company's shares up nearly 60% over the past 12 months. the stock is already highly valued at a price-to-sales ratio of 14.

The most important takeaway from Baird's note to investors is that Shopify is executing well on its long-term growth strategy, setting the stage for new highs for investors who are patient with the company's stock.

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John Ballard does not own any of the shares listed above.The Motley Fool holds a recommendation for Shopify.The Motley Fool has a disclosure policy.

Shopify Stock Has 16% Upside, Says One Wall Street Analyst was originally published by The Motley Fool.