Shopify (SHOP.TO)(SHOP) stock is poised to go higher on strong Black Friday forecasts, Scotia Capital analysts say, even after the substantial price jump spurred by third-quarter earnings that beat expectations earlier this month.
Shares in the Canadian e-commerce software company generally rise in the three weeks leading up to Black Friday, analyst Kevin Krishnaratne wrote in a note to investors Thursday. The situation is slightly different this year because Shopify’s impressive third-quarter 2024 earnings were reported much closer to Black Friday than usual, driving the stock far higher than its usual average gain for the period.
“Still, we think the stock can continue to move higher to close out the year,” Krishnaratne wrote, despite the company’s valuation currently exceeding that of peers by a substantial amount, due to “positive newsflow in and around this weekend.”
From 2016 to 2023, Shopify has averaged a 7.5 per cent increase in the 15-trading-day window ending on Black Friday, Krishnaratne writes. This year, however, the company’s third-quarter earnings, reported on November 12, gave the stock an immediate 21 per cent boost.
This year, one day from Black Friday, the stock is already up over 31 per cent in that 15-day window. As of Wednesday’s close, Shopify shares were at US$112.54. Scotia’s target remains US$115. U.S. stock markets are closed for the Thanksgiving holiday on Thursday.
Scotia Capital expects “strong BFCM [Black Friday Cyber Monday] trends” for Shopify. The usually intense shopping period historically makes up around 12 per cent of the company’s fourth-quarter gross merchandise value (GMV), Scotia says. Its estimates and historical trends contribute to a forecast for Black Friday sales of at least US$4.9 billion (which would represent an 18.7 per cent year-over-year increase) and US$11.3 billion for the entire shopping period (up 21.7 per cent).
Shopify has outperformed broader retail, and financial industry estimates have the company’s same-store sales growth outperforming again in the fourth quarter.
“Our and Street estimates currently call for more consistent GMV growth trends in Q3 and Q4. We could however, at the very least, see an acceleration similar to recent years given multiple areas that are getting harder to model,” Krishnaratne wrote, including enterprise and international areas.
John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jmacf.
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