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Investing.com -- Needham initiated coverage on Shopify (NASDAQ:SHOP) with a Buy rating and a $135 price target driven by to long-term growth potential in international markets and business-to-business commerce.
The brokerage said Shopify remains early in its expansion, despite its wide adoption, and sees room for continued growth supported by a strong product ecosystem and rising free cash flow.
“While Shopify is widely considered a generational software company, we believe the company remains in only the mid-cycle of a durable growth opportunity,” analysts at Needham said.
While shares trade at a premium, 26 times projected gross profit, Needham argued that improving margins and a robust financial profile justify the valuation.
Shopify’s newer international and B2B offerings are seen as the key to its next leg of growth. Needham cited the company’s recent investments in these areas and a large addressable market, estimating a $400 billion revenue opportunity across core regions.
The note also highlighted the strength of Shopify’s platform, including its app store and integrations, which drive customer stickiness and operational efficiency.
Free cash flow rose 76% in fiscal 2024, and margins are expected to continue expanding, potentially reaching 20% by fiscal 2027.
Needham acknowledged near-term caution around U.S. consumer trends but said recent policy changes, including tax-related relief, could support spending in the short run.