RBC Capital Markets analyst Paul Treiber reiterates Outperform rating on Shopify Inc. (NYSE: SHOP), with a price target of $75.
The analyst predicts Shopify Plus and Shopify POS to see strong growth in Q2, which, combined with pricing increases of Shopify's core plans, may drive MRR and profitability upside.
Treiber notes that Shopify's re-focusing on its core business aims to accelerate product innovation.
While Shopify's valuation has materially re-rated upwards, Treiber sees Shopify's improving profitability and new products as potential catalysts.
The analyst forecasts Shopify Plus websites to increase 58% Q/Q in Q2, following a 53% Q/Q rise in Q1.
The growth in Shopify Plus merchants and price increases for Shopify's core plans that took effect in April for existing customers suggest MRR growth may exceed RBC/consensus estimates.
The analyst thinks that new product innovations over the next several quarters may be catalysts for the stock.
The analyst forecasts adj. EBITDA margins to expand from -1.5% Q1 to 12.1% 2H/FY23, above consensus at 10.0%.
The increase stems from Shopify's recent 23% headcount reduction, divestiture of logistics, and pricing increases.
These apart, Shopify's large TAM, take rate economics, and strong product execution will likely help sustain positive investor sentiment.
Management sees AI as a material catalyst and envisions Shopify becoming a copilot for entrepreneurship, implying that the TAM for Shopify's core offering will likely expand further, Treiber adds.
Price Action: SHOP shares are trading lower by 4.16% to $65.39 on the last check Thursday.