The runway is long for Shopify(NYSE: SHOP) stock, at least in the opinion of one analyst tracking the company. After examining a ream of fresh data, this prognosticator put a hefty raise in his target on the e-commerce facilitator's share price while maintaining his bullish recommendation. Not all analysts are believers in Shopify's future, so is this optimistic view warranted?
21% upside potential
Last week, RBC Capital's Paul Treiber boosted his fair-value assessment of Shopify to $100 per share, well up from his preceding level of $85. In doing so, he maintained his outperform (read: buy) recommendation, as the new price target sits a comfortable 21% over the stock's most recent closing price.
In his new Shopify research note, Treiber cited data from a number of third-party sources that indicate Shopify's fundamentals will show encouraging growth for the company's third quarter (it's slated to publish those results on Nov. 7).
According to Treiber, the data suggests that merchant growth -- an important operational metric -- will be "solid." This leads the analyst to believe that Shopify's monthly recurring revenue (MRR) growth has a fine chance of landing above the average analyst consensus estimate. Additionally, by analyzing U.S. census data, Treiber concluded that its gross merchandise volume (GMV) could also rise sufficiently to top the consensus, albeit narrowly so.
On the costs side, the prognosticator wrote that a reduction in Shopify's job postings "implies continued cost discipline and potential margin upside."
An underappreciated business
Treiber's latest Shopify analysis is an interesting, and somewhat sideways, means of gauging Shopify's potential. It's well considered and certainly bolsters the buy case for the company, which in my mind is a somewhat underappreciated but high-potential, unique, and pivotal operator in the e-commerce realm.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
