Down 53% from its August 2015 highs, shares of Shopify (NYSE: SHOP) are sharply higher Tuesday after Morgan Stanley upgraded the stock to Overweight and set a $34 price target, suggesting 71% upside to Friday's close.

Analyst Brian Essex calls Shopify "best of breed" in the SMB retail vertical software market and see current levels as an attractive entry point.

The analyst notes downside in Shopify came despite the company substantially beating expectations for its first two quarters as a public company. The firm is optimistic about the company's market opportunity and views risk reward as very favorable at current levels.

Despite its strong growth, Essex said the company's penetration still equates to only 2% of the merchants in its target markets leaving plenty of runway.

In the company's most recent quarter it reported year-over-year revenue growth of 93% with break even cash from operation. This outperformance was driven by 69% year-over-year MRR growth, year-over-year GMV growth of 101%, year-over-year take rate expansion and merchants now exceeding 200,000 on the platform. The firm's forward estimates forecast revenue growth to 51% year-over-year next year driving an inflection to positive free cash flow.

The analyst is also positive on the company's growing relevance as a federated platform. The company has yet to realize the full benefit of its recent enhancements to its platform including shipping partnerships with USPS and Uber Rush (9/15), buy button integration with Facebook, Twitter and Pinterest (see Positioning for Buy Buttons), a Facebook Shopify tab (10/15), and its first consumer facing mobile app with Sello (12/15), the analyst highlights. In addition, the company partnership with with Amazon (preferred migration partner) and expansion with other shipping partners could help drive incremental organic and affiliate traffic to the platform over expectations.

In addition to the firm's base case price target of $34, they offered a bull case price target of $61 which would be appropriate if the platform continues to deliver significant growth. The bull case suggests 207% upside to Friday's close. Meanwhile, they have a bear case price target of $14, which would be appropriate if execution slips.

Shares of Shopify last traded up 7% to $21.30.