Shopify Inc. Receives Upgrade Despite “Elevated” Valuation

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Analyst Projects Strong Growth for Shopify

Michael Morton of SVB MoffettNathanson has upgraded Shopify Inc.’s rating to outperform from market perform, citing an expected “inflection in the business that consensus is currently missing.” Despite acknowledging the company’s “elevated” valuation, Morton remains optimistic about Shopify’s potential with its enterprise customers. He believes that Wall Street has been too distracted by Shopify’s recent fulfillment challenges to recognize the value of the company’s Shopify Plus service for enterprise players.

Positive Reception to Shopify’s Product Improvements

According to Morton, the enterprise market and system integrators have taken notice of Shopify’s product improvements. The company is in the early stages of an enterprise inflection, with initial data indicating increased traction. Notably, web traffic to the Shopify Plus login page surpasses that of incumbent enterprise offerings. Furthermore, large system integrators have embraced Shopify, and independent agencies that work with Shopify are witnessing growing interest from bigger enterprise customers.

Overall, despite its current valuation, Shopify’s positive developments and strong potential with enterprise customers have led to this upgrade.

Shopify’s Growing Success and Key Additions to Leadership

According to analyst Morris, Shopify’s recent data points collectively indicate a promising trajectory for the company’s enterprise success. With this in mind, Morris has raised his price target on the stock from $35 to $76.

Additionally, Shopify has recently made noteworthy leadership additions. Bret Taylor, a former executive at Salesforce Inc., joined the board of directors in June. Furthermore, Bobby Morrison assumed the position of chief revenue officer in August.

While executive hires typically may not seem significant as part of an investment thesis, these recent actions carry important implications for Shopify’s enterprise success. Previously lacking a director with enterprise-software experience, the addition of Taylor to the board is expected to profoundly impact the company’s enterprise sales process.

Although Evercore ISI analyst Mark Mahaney expressed a more cautious view by downgrading the stock to “in-line” from “outperform” due to perceived limited future catalysts, Morris’s upgrade reflects confidence in Shopify’s growth potential. Despite this differing analysis, shares of Shopify were up approximately 2% in premarket trading on Monday.

In conclusion, Shopify’s promising data, combined with notable additions to its leadership team, suggests a growing enterprise success story.

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