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Will Shopify Quadruple Sales By 2025?

By Danny Vena – Jun 15, 2020 at 1:33PM

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The stock scored an upgraded on the strength of its platform sales and its partnership with Walmart.

Shopify (SHOP -1.42%) will likely quadruple sales on its e-commerce platform over the coming five years, according to Piper Sandler analyst Brent Bracelin. The analyst cited "early signals that COVID-19 could drive a permanent structural industry change to consumer purchasing behavior." 

As a result, Bracelin upgraded Shopify stock on Monday to overweight (buy) from neutral (hold), and raised his price target to $843, up from its previous level of $733. That represents an implied upside of 14% from the stock's closing price on Friday.

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Bracelin believes shoppers worldwide are participating in a "great digital awakening," the result of widespread stay-at-home orders due to the pandemic. With the exception of the travel industry, digital volumes increased across a number of industries he tracks, up 74% year over year during May, twice the growth rate in the first quarter.

"Leveraging a critical footprint as the global retail operating system for 1 million+ merchants today with an expanding product offering, [Shopify] is one of the best positioned digital commerce beneficiaries for the next decade, in our view, with revenue poised to quadruple to $12 billion by 2025," Bracelin wrote in a note to clients.

This comes on the heels of an announcement that the company is partnering with Walmart (WMT -0.27%), which plans to add as many as 1,200 Shopify merchants to its e-commerce platform as third-party sellers by year-end.

It's worth noting that Shopify stock has already nearly doubled so far in 2020, and Bracelin admitted that its valuation was frothy. "While we acknowledge the sentiment rerating witnessed this quarter (+80% quarter-to-date) adds a substantial amount of near-term valuation risk, we consider Shopify a franchise cloud software holding for growth investors willing to look out beyond 2022 and would recommend building positions."

Shopify currently trades at 52 times trailing-12-month sales, and an only slightly more reasonable forward valuation of 43.

Danny Vena owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Shopify Inc. Stock Quote
Shopify Inc.
SHOP
$27.85 (-1.42%) $0.40
Walmart Stock Quote
Walmart
WMT
$130.95 (-0.27%) $0.36

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