Shopify Initiated Overweight on Market Potential - Shares Up

Shopify shares were initiated overweight at Atlantic Equities, which cited a "vast" addressable market for the e-commerce tech company.
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Shopify  (SHOP) - Get Report shares were higher after the e-commerce-tech company was initiated overweight at Atlantic Equities.

The investment firm set a price target of $1,150 on the stock, representing 11% potential upside from the stock's Tuesday closing price.

"Shopify is also significantly undermonetized, with product extensions, such as fulfillment, providing a significant upside opportunity," Atlantic Equities said. 

"The stock’s valuation is the key hurdle, but the total addressable market is vast, there are increasing benefits to scale, and e-commerce acceleration has sustained as economies reopened," analyst Kunaal Malde said. 

Shopify shares at last check rose 2.9% to $1,067.43..

The firm notes that Shopify's gross margins are in the mid-50s, thanks to its 80% subscription gross margin combined with the 40% merchant gross margin. 

As of 2019, the company has reached 1.1 million merchants, who sold $61 billion of products to about 300 million consumers.

The coronavirus has accelerated the company's growth, with Atlantic Equities putting Shopify on track to deliver $100 billion in gross merchandise volume in 2020.  

The company was able to grow revenue 47% year over year in 2019, generating $1.6 billion on its top line. 

"Shopify is powering the fast-growth direct-to-consumer economy, which is seeing digital native merchants leverage targeted marketing to reach consumers," Malde said. 

"Our analysis indicates e-commerce itself should deliver double-digit growth for the foreseeable future, even after the pandemic-driven acceleration in 2020, supporting the longevity of Shopify’s growth."

Founded in 2004, Shopify provides a software-as-a-service platform that helps small businesses create online storefronts. 

Shopify Chief Operating Officer Harley Finkelstein is a scheduled guest on Jim Cramer's "Mad Money" broadcast tonight.