Shopify Inc.: Initiation of Research Coverage

Tuesday, July 11, 2017

William Blair & Company initiated research coverage of Shopify Inc. (SHOP $88.99), the leading cloud-based, multichannel commerce platform designed for small and midsize e-commerce businesses.

Analyst Justin Furby estimated the company would generate revenue of $628.5 million in 2017 and $895.4 million in 2018. Merchants on Shopify’s platform generated $15.4 billion of gross merchandise value (GMV) in 2016, and Furby sees a path to $60 billion-plus in GMV by 2020.

“Shopify’s merchant base increased 55% last year, while its GMV nearly doubled,” Furby said, “helping drive roughly 90% top-line growth. Its nearly 12,000 partners have been a consistent referral channel—sourcing roughly one-third of Shopify’s new bookings—and have built over 1,500 apps leveraging Shopify’s open APIs. Shopify is the leading e-commerce platform provider in the SMB e-commerce market—a roughly $13 billion opportunity, of which it is just 3% penetrated. It provides merchants with a full suite of integrated solutions to run their businesses, including e-commerce, payments, and point-of-sale. Shopify’s best-of-breed software, combined with its base of over 425,000 merchants and its partner ecosystem, provides it with a strong brand presence and a flywheel that we view as unmatched in the SMB e-commerce market.”

Furby continued, “We believe the company’s large addressable market, coupled with its recent push upmarket and successful cross-selling of products such as payments and POS, provides it with runway to drive revenue growth of 35%-plus over the next three to five years—while expanding margins.”

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Current Ratings Distribution (as of 6/30/17)

Coverage Universe
Outperform (Buy): 59%
Market Perform (Hold): 34%
Underperform (Sell): 1% 

Inv. Banking Relationships*
Outperform (Buy): 11%
Market Perform (Hold): 3%
Underperform (Sell): 0%

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