Shopify has a competitive moat that warrants a premium valuation: J.P. Morgan analyst – Shopify (NYSE:SHOP)

JP Morgan analyst Reginald Smith initiated coverage on Shopify Inc (NYSE:SHOP) with an Overweight rating and a $74 price target.

According to Smith, Shopify is one of the largest publicly traded payment providers with solid competitive advantages that warrant premium pricing.

According to the analyst, Shopify’s product breadth, ease of use and scale are a clear competitive advantage that will continue to drive industry-leading growth.

Smith modeled 18% compound revenue growth through fiscal 2026 as Shopify benefits from a sustained shift toward e-commerce and scale-up growth initiatives.

The recent pullback creates an attractive opportunity for new investors to enter the market.

Smith leveraged Shopify’s capabilities for global, actionable e-commerce GMV from China, Amazon.Com Inc (NASDAQ:AMZN), Apple Inc (NASDAQ:AAPL) and Walmart Inc (NYSE:WMT) at the level of USD 1.9 trillion, which means the possibility of obtaining real income by almost USD 60 billion (high single-digit growth). This suggests that Shopify has only 11% penetration in its served market.

The analyst estimated that each share point could be worth nearly $600 million in annual revenue.

Moreover, he estimated that offline retail could represent an additional $60-90 billion opportunity globally.

Smith said Shopify’s investment in research and development outperforms the competition, culminating in an unrivaled range of features and capabilities that keep the company at the cutting edge.

Moreover, the analyst saw a “price-for-value” opportunity, particularly for enterprise customers, and estimated that every $100 increase in monthly fees for existing Shopify Plus merchants could be worth $30 million in annual revenue and profits.

Finally, Smith noted that Shopify can narrow the margin gap to similarly sized SaaS companies (potential for $300 million in annual EBITDA) by leveraging artificial intelligence (and other improvements) while retaining its “artisan’s paradise” culture.

SHOP Price Action: Shopify shares were up 2.44% at $64.55 at last check on Tuesday.

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