Why Shopify Stock Popped Today

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What happened 

Shares of Shopify (SHOP 8.79%) leaped 8.8% on Monday, following positive analyst commentary. 

So what

Deutsche Bank analyst Bhavin Shah raised his rating on Shopify’s stock from hold to buy. He now sees the e-commerce platform’s share price climbing nearly 14% to $50, up from a prior forecast of $40.

Shah’s industry checks bode well for the growth of Shopify Plus. Shah believes that the high-end, enterprise-level version of Shopify’s digital retail platform is gaining traction among larger brands. So much so that Shah thinks Shopify’s customer growth could reaccelerate markedly in the coming quarters. 

“Many leading brands are now actively looking to migrate or are in the process of migrating over from legacy/competing solutions, and we note this is in sharp contrast to our conversations over the last 12 months which consistently highlighted the pace of migrations slowing,” Shah said. 

Now what 

Shopify expanded at a torrid pace during the early part of the pandemic when store closures and other COVID-19-related restrictions drove more people to shop online. But e-commerce sales stalled once those health measures were eased, and people returned to shopping at brick-and-mortar stores. Shopify’s pace of expansion slowed along with the overall online retail market, and its stock fell sharply from its highs in 2022.

Yet Shah’s findings suggest that Shopify’s prospects could improve significantly in 2023. That would be welcome news for investors, who would no doubt cheer a quickening of the company’s growth rates, particularly in its high-margin Shopify Plus business.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.