Shopify strategy and competition to impact top and bottom line

By Sam Boughedda

Shopify (NYSE:) shares dipped in the early part of Thursday’s session, hitting a low of $36.56 per share after UBS started it at Sell and assigned a $30 price target on the stock.

Analysts told investors in a note that the company’s long-term strategy and competition will likely impact Shopify’s top and bottom lines. UBS sees a risk to Shopify’s top line near term and bottom line long term.

“Shopify is building a retail ‘operating system’ and is the global leader in eCommerce platforms globally,” wrote the analysts.

They said the firm’s Sell rating is based on the following:

• Its regression analysis and UBS projections for personal consumer expenditures suggest Street consensus estimates for GMV and revenue are not derisked for a recession in 1H23.
• Surveys suggest Amazon’s (NASDAQ:) Buy with Prime could be a significant risk to SHOP’s top line long term.

In addition, the analysts noted that UBS’s deep dive into logistics suggests SHOP’s initial guide of $1 billion of capex in 2023/24 is unlikely to slow down. Meanwhile, the fact that AMZN runs logistics at a loss, has deeper pockets given its cash and higher take rate, and has historically viewed other businesses’ profits as “its opportunity” could impact SHOP’s margins, which do not look to be incorporated in Street estimates, the analysts said.

“We expect revenue to grow at ~16% CAGR over the 2021-2025E period to $7.9B versus the Street at $10.3B. On EBITDA, we are projecting EBITDA at $222M in 2025E, or 2.8% margins versus the Street at $755M or 7.3% margins,” explained UBS.