Shopify (SHOP) shares are rising Tuesday morning following an update from Bank of America. The company raised its rating on the e-commerce platform to Buy from Neutral and raised its price target to $82 from $78. Analysts believe Shopify’s revenue growth, coupled with its disciplined approach to spending, will create a better margin growth in the coming quarters.
Morning Brief co-hosts Sean Smith It is Brad Smith detail the details.
For more expert insights and the latest market action, click here to watch this full episode of Morning Brief.
This post was written by Angel Smith
Video transcript
Alright, Shopify shares are gaining momentum after Bank of America upgraded the stock to buy from neutral, raising its price target from $78 to $82.
The analysts behind the call saying revenue growth and disciplined spending point to healthy margin expansion going forward.
They highlighted the fact that under their new CFO, Shopify has taken a series of, I guess, or taken a series of steps in the right direction, turned in a quarter with balanced margin growth going forward, saying that they see a solid revenue growth, free cash flow conversion is also improving there.
So because of all of that, I think they’re pretty optimistic about what the outlook is like here or what the path forward is going to be.
For Spotify, we forecast year-to-date losses of only about 17.5%.
So they are making the bet.
We will see a small turnaround in the shares.
This is a big story for Shopify and that’s why I mean, if all of their social media companies are essentially the new mall where discovery happens digitally for a lot of potential concerns out there or for those who are trying to find inspiration and then conversions. inspiration and shopping.
Shopify is very intertwined with this experience and could very well be the new big shopping and point-of-sale operator here that we continue to see grow based on what it has already been able to do.
Now the main thing they’re highlighting is free cash flow.
The company talked about this in its most recent earnings call.
They expect free cash flow margin to be similar in the first quarter of 2024.
But this analyst is actually expecting 23% growth in Q2 revenue, specifically pointing to better scale and free cash flow conversion here.
So ultimately that’s the number, that’s the number to track.
Since we’ve heard from Shopify this particular earnings period here, since they’ve given us those results that weren’t expected for a little while here, we’re at the very early start of this earnings season, just getting through the banks still in progress.
