Shopify Price Target Boosted to $1,000 at RBC

Shopify has both near-term and long-term catalysts to get the company to RBC's price target, Thursday's note said.
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Shopify  (SHOP) - Get Report received a boost from analysts at RBC Capital Thursday who reiterated their outperform rating on the stock while raising its price target to $1,000 per share from $825 per share. 

This bullish take is despite the company's doubling of its share price year to date as analysts at the firm says that the market "still underappreciates" a few things about Shopify. 

RBC estimates that U.S. online retail sales accelerated for the fourth consecutive month to 31% year-over-year growth in May.

RBC says, "In our view, consumer buying patterns have changed permanently, effectively pulling forward several key assumptions in our SHOP [discounted cash flow]."

The company is addressing a $16 trillion global retail market of which Shopify's penetration is currently less than 1%. 

RBC analysts expect Shopify to reach annual revenue of $25 billion by 2028, up from an estimated $2.3 billion in 2020.

Shopify's take rate, or the percentage of transactions on its platform that Shopify keeps, is expected to expand by 30 to 40 basis points in the near term driven by increased payment adoption.

RBC also sees a long-term expansion in its take rate of between 100 and 110 basis points driven by increased usage of value-added services (VAS) like Shopify Capital, shipping and the Shopify Fulfillment Network. 

"Shopify provides a leading multichannel operating system for SMB commerce, with product and vision driving differentiation in a crowded space," analysts said. 

"Shopify has reached 1M+ merchants on its platform, which more than tripled from 325k merchants in 2016. The transition from physical retail to e-commerce, adoption by larger brands and international expansion are helping fuel rapid growth," analysts wrote.

Shopify shares rose 3.4% to $845.13 in morning trading Thursday.