Shopify stock surged to a record high yesterday as Amazon remains 9% below its 52-week highs that it hit earlier this year. Investors also gave a thumbs down to the IPO of eCommerce company Wish and it closed below its issue price on the first day of listing.
Shopify
Shopify stock surged 7.8% yesterday and closed at $1,157.31 and made a new record high. The stock has almost tripled this year and is up 68 times since its IPO in 2015. Shopify’s year-to-date returns are much ahead of the 75% rise that Amazon has seen. Etsy stock has risen over 300% so far in 2020.
eCommerce companies have seen a spike in revenues this year as more consumers have embraced online shopping. eCommerce stocks are part of the so-called stay-at-home basket of stocks that have soared this year. Netflix, Zoom Video Communications, and Peloton are among the other stay-at-home stocks that have spiked this year.
Wish IPO disappoints
Meanwhile, it is not that markets have embraced all eCommerce companies. Yesterday, Wish that’s owned by ContextLogic listed and priced its IPO at $24—at the top end of its guidance. While most IPOs have done well this year and last week DoorDash and Airbnb delivered stellar gains on the listing day, Wish lost 16.5% and closed at $20.05. It was however trading almost 5% higher in pre markets today.
Shopify makes new record high
Incidentally, while Shopify made a new record high yesterday, Wish, with a much lower valuation failed to close above its IPO price. Wish’s growth rates have been very modest and volatile as compared to the high growth rates that Shopify is witnessing.
Shopify stock is valued at an LTM (last-12 months) price to sales multiple of 54x. In contrast, Wish trades at a 2019 price to sales multiples of only about 7.1x. In the first nine months of 2020, Wish reported only a 32% rise in revenues which hardly beats the revenue growth of Amazon despite Wish’s revenue base being much smaller than that of Amazon.
KeyBanc is bullish on Shopify
Yesterday, KeyBanc issued a bullish note on Shopify and expects that it would charge a new eCommerce fee to its clients like Amazon. “Shopify has quietly expanded Shop Pay from a checkout wallet to a consumer-facing Shop App that offers package tracking and recommended product browsing,” said KeyBanc Capital Markets analyst Josh Beck pointing to over 60 million buyers for Shop Pay.
He also added, “While monetization details are limited at this early juncture, we see a future where Shopify could earn a referral fee (for example, Amazon generally charges a 15% take rate for many of Shopify’s merchant categories). Assuming Shop App is about 20% of total payment volume an incremental take rate would imply a $100 million revenue opportunity.”
Analyst target price
According to the consensus estimates compiled by CNN, Shopify has a median price target of $1,150 which is similar to its current prices. Its highest price target of $1,400 is a 21% premium over current prices while its lowest price target of $550 is over 52% lower than the current price.
That said, Wall Street analysts have generally been behind the curve when it comes to growth companies. Tesla has generally traded above its consensus price target since October 2019 while NIO has also traded above its mean price target over the last six months. Most of the time analysts have raised their target prices after the stocks have already run-up.
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