Shares of Shopify (SHOP -0.13%) have already climbed 237% over the past year, but will surge to new all-time highs in the coming year.
That's according to Wedbush analyst Ygal Arounian. On Wednesday, Arounian upgraded Shopify's stock to outperform (buy) from neutral (hold), while raising his price target from $998 to $1,300. His new target represents potential gains for investors of roughly 27% over the stock's closing price on Tuesday of about $1,026.
Arounian pointed to ongoing changes in consumer behavior and the accelerating adoption of e-commerce as long-term drivers. Shoppers flocked to online shopping, and merchants who had been dragging their feet scrambled to set up websites in the face of the pandemic, as physical retail stores were shuttered. Many turned to Shopify to help with the transition.
The analyst believes these trends will continue. Arounian says he continues "to see the pull-forward in e-commerce trends as being sustainable over time, driven in large part by ongoing changes to consumer habits."
The evidence suggests he is on target. A recent report by the Department of Commerce shows that e-commerce sales surged 44% year over year in the second quarter, even as total retail fell more than 3% during the same period. Online retail now represents about 15% of total sales.
Shopify's revenue and profits could continue to rise sharply as the e-commerce ecosystem draws in more shoppers, thereby attracting more merchants. As an industry-leading e-commerce platform, Shopify will see demand for its services only increase from here, so the potential for its shares to hit $1,300 in the coming year is not only possible, but seems entirely likely -- and it could happen even more quickly than many investors expect.