Piper Sandler's Coverage of Web Builders#
Piper Sandler has recently started covering the Web Builders sector and has identified Shopify as its top pick. The brokerage believes that Shopify is well-positioned in the online commerce space, even though its valuation is currently high.
Shopify's Rating and Growth Potential#
Piper Sandler has given Shopify an Overweight rating, along with a price target of $165. The firm views Shopify as a crucial part of global commerce infrastructure and anticipates ongoing upward revisions in growth estimates. They project a 28% year-over-year growth for Shopify in 2027, which is higher than the 24% growth expected by other analysts. This optimism is supported by data showing that Shopify's early customer groups are performing better than during the COVID-19 pandemic.
Key Drivers of Shopify's Success#
The investment case for Shopify is built on three main factors: 1. Cohort Analysis: Research indicates positive trends, suggesting that Shopify could outperform current market estimates. 2. Payments Growth: Shopify's payment solutions, like Shop Pay, have significant room for growth, with over $50 trillion in untapped potential as they expand globally. 3. Market Positioning: Shopify is moving into higher-end markets, establishing itself as a leading choice for e-commerce. Positive feedback indicates that merchants using other platforms may miss out on sales opportunities if they sell more than 100 units per month.
Valuation Insights#
Piper Sandler notes that there is considerable room for growth in the enterprise sector, with about 80% of top e-commerce sites being custom-built or not applicable to Shopify's platform. Currently, Shopify shares are trading at around 9 times the estimated revenue for 2027 or 19 times gross profit. While this may not seem inexpensive, it is relatively low compared to historical averages over the past few years.
In its latest quarterly report, Shopify exceeded analyst expectations, showing strong revenue growth and an increase in gross merchandise volume. Following this report, several firms adjusted their price targets downward due to concerns over tax rates and valuation issues.