Shopify (SHOP) - Get Free Report will be able to capture a share of the e-commerce market in the short term and over time, a Wedbush analyst said, upgrading the e-commerce software-and-services provider to outperform from neutral.
"We continue to see strength in Shopify’s near-term ability to capture share in e-commerce," said analyst Ygal Arounian, who also raised his price target to $1,300 from $998.
The analyst continues "to see the pull-forward in e-commerce trends as being sustainable over time, driven in large part by ongoing changes to consumer habits."
Shares of the Ottawa company at last check were little changed at $1,027.65. The new price target indicates 27% upside from Tuesday's closing price.
Arounian said the coronavirus pandemic "has upended retail, driving significant changes in consumer behavior, a major spike in e-commerce, and a shift towards a retail world where online and offline shopping are more closely integrated."
The analyst said the pandemic has strained supply chains, increasing the importance of fulfillment for small to midsized businesses and direct-to-consumer companies. That in turn increases the importance of the Shopify Fulfillment Network, which the company launched last year, the analyst said.
"In the near term, we still see the pandemic-driven changes to e-commerce as a benefit for the Shopify platform, and see continued upside to estimates, even before [Shopify Fulfillment Network and Point of Sale] contribute in material ways," Arounian said.
The analyst said that fulfillment and logistics have always been critical components of e-commerce, "but a comprehensive, cost effective and convenient solution has taken on a new level of importance in the post-pandemic environment."
While Shopify has targeted $1 billion in SFN costs through 2023E, this reflects an expected cash-neutral rollout that would also come alongside the expected $1 billion in revenue through 2023E," Arounian said.
"We view all this as just the first steps in a much larger opportunity that can also help Shopify gain traction in business-to-business e-commerce as well over time, a significant opportunity that Shopify is yet to really penetrate."