Shares of Shopify (SHOP 3.17%) turned higher on Thursday, climbing as much as 7.4%. As of 1:45 p.m. ET, the stock was still up roughly 3%.
While the broader market updraft likely added fuel to its ascent, the e-commerce platform provider was also on the receiving end of some positive commentary from a Wall Street analyst.
A (moderately) positive call?
Analysts at Citi raised their price target on Shopify to $96, up from its previous level of $87. This represents potential gains for investors of roughly 13% compared to Wednesday’s closing price. Before you get too excited, Citi maintained its neutral (hold) rating on the stock, which was closing in on the previous price target when the market closed yesterday.
The analysts cited improving IT spending conditions as the economic recovery gathers steam, particularly in the e-commerce space. However, the firm’s positive view is tempered by the “uptick in layoffs” in the tech sector.
There is also concern that recent changes in email authentication standards might trip up some Shopify customers who use its third-party email provider services. While it is merely a matter of authenticating and updating domain names, the update process can take 24 hours and result in delayed email delivery if not properly implemented.
Now what
The improving economic landscape and waning inflation will no doubt boost consumer spending. This, in turn, will benefit online sales and Shopify itself.
Shopify is scheduled to report its fourth-quarter and full-year results on Tuesday, and investors will be watching closely to see whether the company can repeat its consensus-beating performance of the third quarter. Management has been focusing on profitability, a strategy that has been paying off. In Q3, Shopify delivered its fourth consecutive quarter of positive free cash flow and has generated a profit in two of the past three quarters.
Analysts’ consensus estimates are calling for revenue to increase 20% to $2.08 billion and adjusted earnings per share of $0.31, up 343%.
It’s been a long road, but Shopify has positioned itself for a bright and profitable future. The stock is a buy.
Citigroup is an advertising partner of The Ascent, a Motley Fool company. Danny Vena has positions in Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
