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Shopify (NYSE:SHOP) rallied in early trading on Friday after Morgan Stanley boosted its rating on the e-commerce stock to Overweight from Equal-weight. The firm thinks Shopify (SHOP) is well-positioned to sustain +20% CAGR through FY30 supported by success moving up market and expanding international traction. The valuation on SHOP was called more reasonable on a normalized free cash flow basis.
Analyst Keith Weiss said that despite questions around the durability of Shopify’s (SHOP) operating margin expansion following Q4 results, the firm thinks investor expectations have corrected too far and commentary pointing to modest headcount expansion in FY24 still leaves room for further realization of operating leverage and free cash flow growth in the business. “We update our model to reflect more durable GMV strength and ~160bps/~170bps of better operating margin expansion in FY24/FY25, resulting from stable headcount expansion,” highlighted Weiss.
Morgan Stanley hiked its price target on Shopify (SHOP) to $85.
Shopify (SHOP) rose 2.88% in premarket trading to $71.51 vs. the 52-week range of $45.50 to $91.57. The e-commerce stock is still down close to 11% on a year-to-date basis and trades below its 100-day moving average of $77.11.
