The target represents more than 6% potential downside from the stock's Wednesday closing price of about $640 per share.
Analyst David Hynes says software is a good safe haven, even if trades are crowded in the space and valuations are inflated.
Shopify, the Ottawa commerce platform, does have a couple of things working against it, according to Hynes.
"We see two issues with this trade: (1) we’re not entirely convinced that gross merchandise volume, which drives 60% of Shopify's revenue, is as bulletproof as perceived as discretionary spend retreats, and (2) the stock’s valuation, at ~29 times enterprise-value-to-revenue on calendar 2021, is now at an extreme, which means it matters," Hynes wrote.
Hynes says that to keep a buy rating on the stock, Canaccord would have to believe that Shopify could see a valuation of $700 a share in 12 months, representing a multiple of 20 times expected 2022 revenue.
"If that’s the case, where do we need to see 2022 revenue to support a $700 stock? Our back of the envelope math says you’d need about $4.5 billion in 2022 revenue, which is a 41% three-year revenue compounded annual growth rate and an estimate that’s currently about 10% above a very crude consensus projection," Hynes wrote.
Canaccord doesn't expect Shopify's stock to "crater" because the industry dynamics in the current crisis are in the company's favor.
Shopify shares were down 0.6% to $635.89 at last check.