Will The Ecommerce Revolution Lift Shopify Inc ($SHOP) To $350?


Shopify Inc (NYSE: SHOP) is slated to announce earnings on Tuesday, July 31st. The Wall Street is expecting the ecommerce company to report revenue of $234.6 million, which shows a growth of about 55% year over year. Shopify stock recently took a hit after a Supreme Court ruling made it possible for authorities to collect sales tax from internet retailers. On June 30th, Capital Forum gave a bearish rating for Shopify on the back a development according to which U.S. may reportedly eliminate the small-packets product category. This development will increase costs for shippers such as Shopify.

But we believe that Shopify stock should be bought on the current weakness

Shopify Inc (NYSE: SHOP) demand is surging exponentially amid a rise in ecommerce stores worldwide. The trend of selling products online is increasing rapidly, as physical stores experience a major decline in foot traffic. Despite the increase in ecommerce sales, they account for less than 20% of the total retail industry. This shows that there is no saturation in this area. Shopify provides the easiest method to build ecommerce websites.

In the first quarter of 2018, Shopify Inc (NYSE: SHOP) reported revenue of $214.3 million, 68% more than the revenue reported in the same period last year. The good sign about Shopify’s revenue is that a major chunk of it comes from subscriptions. In the first quarter, 47% of the company’s revenue came from subscriptions. Subscription revenue jumped a whopping 61% year over year to $100.2 million.

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Shopify Inc (NYSE: SHOP) is expanding its business in multiple directions. Recently, the company signed a deal with Canadian cannabis company Aurora Cannabis. According to the deal, Aurora will use Shopify as its e-commerce engine for medicinal and recreational cannabis distribution across the world.

On July 10th, Shopify signed a deal with Alphabet after which marketers will be able to directly buy Google ads for consumer products through Shopify. These ads will help Shopify sellers increase their organic reach and deplete their reliability on social media and Amazon. This partnerships shows Google’s trust in Shopify in its fight against Amazon.

Shopify Inc (NYSE: SHOP) has more than 600,000 merchant accounts. These accounts are expected to increase as more and more people open internet shops daily.

On July 24th, investment firm Roth Capital set a price target of $192 for Shopify, which shows a huge upside from the current price of $148. The firm increased the price target from $165.

Last month, retail banking company KeyBanc issued a bullish rating for Shopify stock. The firm based its outlook on the healthy momentum of transaction volume.

KeyBanc has a price target of $242 for Shopify Inc (NYSE: SHOP). The long-term price target is $350.

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Author does not have investment in stock discussed in this article.

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