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Shopify shares have big upside potential as the company gains traction with larger enterprise businesses, according to JMP. Analyst Andrew Boone upgraded Shopify shares to market outperform from market perform. His price target of $65 per share implies 45.1% upside from Tuesday’s close price. “After analyzing the OpEx structure across the website builders, assessing third-party website traffic data, and speaking to professional website developers across these platforms, we are reaffirming our view that Shopify is the leader in commerce enablement and continues to take share,” Boone wrote in a Wednesday note to clients. Shares of Shopify gained 2.5% Wednesday before the bell. Shares have rallied 29% in 2023. However, the stock has tumbled 24.2% during the past 12 months. SHOP YTD mountain SHOP in 2023 To be sure, the analyst said Shopify, as well as other website builders, can engage in greater expense discipline. The firm noted that while Shopify became the largest platform in terms of revenue in 2021, its advertising expense is more than those of Wix and Squarespace combined in 2022 and 2023. “In 2023, we expect R & D to represent ~19% of Shopify’s revenue, up from ~16% in 2019. … While we acknowledge Shopify now offers a broader set of services, we note of the $495M Y/Y increase in R & D spend in 2022, $456M was attributable to employee-related costs and increased headcount, including additions from its Deliverr acquisition,” said Boone. “This leads us to believe that there are significant cost synergies available to Shopify that can lead to upside to our profitability projections,” Boone added. —CNBC’s Michael Bloom contributed to this report.
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