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Shopify stock has clawed back from some of the losses it posted after the e-commerce company reported a surprise third-quarter loss Tuesday morning.
The shares (ticker: SHOP) fell almost 7% immediately after its earnings report to just under $300, but had pared about half its losses to trade around $315 midday Wednesday.
Perhaps it’s because analysts and investors are starting to digest some of the positives from its results, including Shopify hitting a million merchants on its platform.
The company’s “million merchant milestone should be lauded not only for the achievement by a steadfast management team with customer-first objectives, but for its consistent financial execution all the way up,” Rosenblatt Securities Mark Zgutowicz said in note to clients.
He rates Shopify stock as a Buy with a $481 price target. While the company’s growth in gross merchandise volume, or GMV, and revenue from merchant solutions has been steadily decelerating for a few years, Zgutowicz pointed out that growth in the GMV-per-merchant metric is accelerating. There has been a “resurgence” in GMV per merchant, he writes, to 8% growth this past quarter from a year earlier, after bottoming out to under 5% growth in the 2018 fourth quarter.
In other words, Shopify’s merchants are selling more on a per-store basis, which makes those merchants more valuable to the company. That’s exactly the sort of financial performance investors would hope to see from a maturing, scalable business.
Raymond James’ Brian Peterson, who has a Buy rating and $365 price target on the stock, was impressed with the company’s international growth and emphasized that revenue came in above Wall Street’s expectations. As a result, he still believes it “remains an elite growth SaaS [software as a service] asset with 40% revenue growth at scale” and that it’s worth its 27 times sales valuation.
Write to Ben Walsh at ben.walsh@barrons.com