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Shopify Earns Upgrade From Goldman on Strength Amid Pandemic

Continuing growth in e-commerce is likely to 'provide a sustained tailwind' to Shopify, says Goldman Sachs analyst Christopher Merwin
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Shopify  (SHOP) - Get Free Report rose in a down market Tuesday, after Goldman Sachs analyst Christopher Merwin upgraded the e-commerce platform to buy from neutral and maintained his share-price target of $1,127.

Shopify stock recently traded at $988.63, up 1.25%. Shopify shares have soared 149% year to date. By comparison, the Nasdaq Composite has climbed 17% during that period.

Merwin is impressed with Shopify’s strength amid the coronavirus pandemic that has boosted the entire universe of ecommerce companies.

“Following global shelter-in-place orders in response to Covid, U.S. e-commerce penetration went from 16% of retail spending in the first quarter to 40% in May,” he wrote in a commentary.

Goldman Sachs has estimated that U.S. e-commerce revenue will jump 29% this year, up from its prior forecast of 15%.

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“We believe [that] would provide a sustained tailwind to SHOP’s gross merchandise value growth, and by extension its merchant solutions revenue,” Merwin said.

“While we have missed a significant run-up in SHOP shares, we would point out that SHOP has one of the largest total addressable markets in software, which we measure at $200 billion globally,” the analyst added.

Given, “a unique customer acquisition funnel that has not only found unmatched success in small and medium-size businesses but increasingly the enterprise segment as well, we believe SHOP should be able to sustain hyper-growth for longer than the market expects,” Merwin said.

Meanwhile, Morningstar analyst Dan Romanoff has a positive take on the company but puts fair value at only $238.

Shopify's second-quarter earnings are scheduled to be released on Wednesday.