Shares of Shopify (SHOP -1.42%) have jumped to all-time highs today, up by 5% as of 12:50 p.m. EDT, after getting a bullish initiation from Wall Street. Argus kicked off coverage of the e-commerce company with a buy rating alongside a $1,050 price target.
Analyst Jim Kelleher notes that physical retailers have been struggling for years, and the COVID-19 pandemic has underscored the need for small and medium-sized businesses to expand their online presences and sales channels.
"COVID-19 has also placed limits on brick-and-mortar commerce and heightened the need for a multichannel go-to-market model," Kelleher wrote in a research note to investors. "Even as the pandemic recedes, we expect the many merchants who have converted to fully digital e-commerce to maintain a strong online retail presence."
As the most valuable company in Canada by market cap, Shopify has also become a "core holding for institutional investors in North America," which should help support the share price, according to the analyst. Despite the recent rally, Argus believes there is more upside, as Shopify has "a strong runway for growth in the small merchant market."
Recent efforts to support merchants during the coronavirus crisis are helping to drive growth. For example, Argus notes that new stores created on the e-commerce platform jumped 62% from mid-March to the end of April, thanks in part to Shopify extending its merchant trial period from 14 days to 90 days.
Shopify previously withdrew its 2020 guidance due to macroeconomic uncertainty related to the virus, but Kelleher is modeling for adjusted earnings per share of $0.50 for 2020 and $0.72 for 2021.