Key insights
- UBS reiterated a Neutral rating on Shopify with a $130 price target, citing the underappreciated growth potential of its Retail POS business. While the stock has declined, analysis suggests it remains undervalued. The POS segment is expected to significantly contribute to Shopify's future GMV and gross profit growth, leveraging a large and fragmented market where a modern leader is absent. This positive outlook on a specific business segment, despite a neutral overall rating, suggests limited immediate impact on broader US equity markets.
Investing.com - UBS reiterated a Neutral rating and $130.00 price target on Shopify (NASDAQ:SHOP), which currently trades at $110.32. The stock has declined 32.8% over the past six months, though InvestingPro analysis suggests the company remains undervalued at current levels.
The firm noted that Shopify’s Retail POS business comprises approximately 12% of gross merchandise volume today and could approach 20% by 2035. UBS stated this business represents an important part of the longer-term growth algorithm and a relatively underappreciated portion of the company’s terminal value.
UBS expects Shopify’s POS business to contribute approximately 300-500 basis points to Shopify’s 10-year GMV compound annual growth rate of 15%-21%. The firm also projects the POS business will contribute approximately 100-200 basis points to the 10-year gross profit CAGR of 15%-20%. The company currently maintains a gross profit margin of 47.97% with revenue growth of 31.85% over the last twelve months, demonstrating strong operational momentum. For deeper insights, investors can access Shopify’s comprehensive Pro Research Report, one of 1,400+ available on InvestingPro.
The firm highlighted the differentiated offering combining Shopify eCommerce and ecosystem with in-store POS. UBS noted the large total addressable market, stating in-store volumes are multiple times larger than eCommerce.
UBS described the market as relatively fragmented with the absence of a modern leader. The firm compared this to the SMB and mid-market restaurant POS segment where Toast holds approximately 30% share of volume in the U.S.
In other recent news, Shopify reported impressive first-quarter results, with gross merchandise volume and EBIT surpassing prior estimates by 2% and 14%, respectively. Revenue growth reached multi-year highs, contributing to a solid performance, as noted by RBC Capital, which reiterated its Outperform rating and set a price target of $170. Cantor Fitzgerald, however, lowered its price target to $115 from $126, maintaining a Neutral rating due to margin concerns. Piper Sandler and KeyBanc both reiterated their Overweight ratings, with price targets of $150 and $160, respectively, highlighting the potential of AI to drive growth on the platform.
Additionally, Shopify received a $100 million investment from Thrive Capital, a move seen as a bet on AI’s potential to enhance commerce. Thrive Capital is known for its investments in startups such as OpenAI. This development indicates strong investor interest in Shopify’s future growth prospects. These recent developments reflect a mix of optimism and caution among analysts regarding Shopify’s financial outlook.
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