Shopify got a Buy rating. Why do analysts recommend it?

Shopify got a Buy rating. Why do analysts recommend it?

Shopify is a successful tech stock. This company helps over one million businesses build, grow, and maintain their e-commerce presence.

Shopify gets to profit from recurring subscription fees and add-ons, such as payment processing. It also partners with influential players within tech and retail, including both Walmart and Facebook.

The company’s offerings are very attractive in an age where retailers need to expand their digital reach. As a result, its sales are growing rapidly, rallying by 73%, 59%, and 47% in the last three years alone.

The Covid-19 pandemic has pushed e-commerce into the spotlight, as big and small businesses rush to roll out for the first time or give their digital retail platforms a boost.

How does Shopify fare now?

Currently, Shopify is one of the hottest names in the tech sector. It even surpassed stay-at-home standouts such as Zoom and Netflix since mid-March. The stock skyrocketed with more than 200%, surging from under $350 per share to over $1,000.

After such a run, the stock is almost to the point of a near-term pullback. Despite that, Shopify will probably remain attractive in the long run as it combines e-commerce, and fintech, along with other growth areas.

Furthermore, e-commerce sales only accounted for approximately 12% of total U.S. retail sales in the first quarter. The stock has lots of space to expand beyond that. According to Zacks estimates, Shopify’s Q2 sales may jump by 38%, with its full-year revenue projected to rally by 37% in FY20 and another 34% in FY21.

While that would be a slowdown compared to the stock’s recent growth, Shopify remains strong, standing out within the current economic conditions.

The company’s adjusted Q2 earnings may slip to -$0.01, but according to forecast, its full-year EPS figures will jump by 73% and then another 23%. Considering all this, analysts gave this stock a Buy rating.

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