The analysts at Atlantic Equities have changed the Shopify (SHOP) rating from overweight to neutral. In addition, the price target for the Shopify stock was also raised from $55 to $65.
The recent improvement in the rating and share price target is due to the recent changes made by Shopify. Recently, the Shopify company announced that it would be cutting 20% jobs. Similarly, Shopify also announced that it will be selling its logistics company.
According to experts, Shopify has removed a major capex outlay by selling its logistic business. As a result of this development, the medium-term FCF of Shopify has improved drastically.
In addition, the monetisation trends and the reduction of the workforce will also have a positive effect on the company's finances.
Based on these changes, more upside is highly likely to be seen in Shopify. In fact, many experts believe that Shopify's gross profit will also show healthy growth in the next few quarters.
If we look at the new price target of $65, it shows that a bullish trend will likely continue, at least in the near term. And the fuel for this bullish momentum will be an improvement in the underlying business.
For now, the gross profit multiple of Shopify is back to where it was before the pandemic. But the strange thing is that the current growth is only half of what it used to be before the pandemic.
During the premarket session on Tuesday, Shopify stock was down by 2.6%, but over the short to medium term, the trend is inclined towards the top.
Considering how Shopify holds a major stake in online ecommerce, it makes sense to be bullish on this! The thing that makes Shopify one of its kind is that it specializes as a SAAS ecommerce platform. This SAAS model enables Shopify to have a steady stream of revenue from its customer base.