Rosenblatt Starts Shopify (SHOP) at Buy
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Rosenblatt initiates coverage on Shopify (NYSE: SHOP) with a Buy rating and a price target of $50.00.
Analyst Kirk Adams commented, "We are initiating coverage of the SAAS ecommerce technology company, Shopify (SHOP), with a Buy rating and a one-year price target of $50, based on 2017 P/S of 7X $589M. The street expectations are for 44% revenue growth in FY2017, which we think is very low. We expect overall revenue growth in FY2017 of 60%, which we think could prove to be conservative based on the nearly 80% number they are guiding to for FY2016. We see subscription solutions revenue growing 50% in FY2017 and merchant solutions revenue growing 70% in FY2017. FY2016 growth at the company guidance would be 62% and 99%, respectively. Gross margins will decline slightly based on the strong growth of the lower margin merchant services, but we will see some operating leverage in FY2017. We have modeled 3Q16 and 4Q16 to guidance, but the implied revenue guidance for 4Q16 is currently at around 61% growth, which could prove to be low as well. We also believe that the excellent market position in a large, growing market, strong balance sheet, cash generation and ability to generate positive Non-GAAP earnings by 4Q17 demands a high multiple."
Shares of Shopify closed at $42.48 yesterday.
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