Shares of Shopify (SHOP 1.11%) jumped as much as 7.7% higher on Friday morning, buffed by a bullish research report from analysts at Wells Fargo.
Wells Fargo's bullish Shopify analysis
Wells Fargo analyst Andrew Bauch reaffirmed his overweight rating on the e-commerce services stock while lifting the price target from $80 to $90 per share. In a note to clients, Bauch said that a robust holiday shopping season was already baked into Shopify's stock price. In order to go higher from here, he's looking for product updates and long-lasting profit margin improvements.
Investors were quick to embrace this optimistic analysis, taking Shopify's stock back to prices not seen since the start of 2022 -- the early days of the inflation crisis.
What to look for in Shopify's upcoming earnings report
Bausch's recommendation is among the most bullish takes on Shopify today. Analysts' target prices range from $30 to $100 per share, with a modestly positive rating but more downgrades than upgrades in recent months.
Shopify's stock has indeed raced higher recently, gaining 67% in the last three months thanks to signs of a healthy shopping season. The company tugged on its own bootstraps when it reported $9.3 billion of Black Friday/Cyber Monday sales. That's 24% above the year-ago reading and a reliable sign of strong financial results in Shopify's fourth-quarter report, scheduled for the evening of Tuesday, Feb. 13.
Prospective Shopify investors should wait for that quarterly report, keeping a close eye on new product announcements along the way. And let me remind you that Shopify's operating margin started falling before the inflation panic started, finally trending upward again in the third quarter but from a deeply negative trough. The company's end-market customers appear quite sensitive to economic pressure and rising prices, and consistent improvements on this point would show that Shopify can operate effectively under that pressure.
