Shopify (NYSE: SHOP) stock fell into bargain-buy territory after a disappointing second-quarter earnings report. But the company’s pivotal position in the e-commerce segment and a new partnership with Target make it an absolute steal at its current price.
If you’re not familiar, Shopify is the second-largest cloud-based e-commerce software platform in America. It obviously trails Amazon, but it has still managed to capture 10% of the broader e-commerce market.
That might not sound like much, but you have to remember how big the e-commerce market is. Grand View Research estimates the U.S. e-commerce market was $25.93 trillion in 2023. And going forward, the firm anticipates a compound annual growth rate (CAGR) of 18.9% from 2024–2030, bringing the market to more than $83 trillion in six years.
That’s a tremendous opportunity for Shopify, which helps retailers big and small create, manage, and grow online stores. That includes things like web design, inventory management, payment processing, analytics, and reporting.
That’s all well and good, but this week the company kicked things up another notch with a new partnership with Target. Join Wealth Daily today for FREE. We’ll keep you on top of all the hottest investment ideas before they hit Wall Street. Become a member today, and get our latest free report: “How to Make Your Fortune in Stocks.” It contains the best dividend growers to add to your portfolio and full details on why dividends are an amazing tool for growing your wealth. After getting your report, you’ll begin receiving the Wealth Daily e-Letter, delivered to your inbox daily.The Best Free Investment You’ll Ever Make
You see, Target’s online transactions lag far behind not just Amazon, but also its chief competitor, Walmart, as well. It’s embarrassing, actually. Walmart’s online sales are five times higher than Target’s, standing at roughly $100 billion compared with $19.4 billion.
So the company clearly needs Shopify’s help. The company’s expertise will undoubtedly help Target improve its Target Plus online platform. And in return, Target will start carrying products from Shopify vendors.
Target is also bringing select products from Shopify merchants into its physical stores, giving the e-commerce company a brand-new physical presence in one of the country’s top retail chains.
The deal is a win-win and it couldn’t come at a better time.
Shopify stock has been flying high for a while. It shot from $46 per share in November to a high of $91 per share in February. However, a disappointing earnings report in May sent Shopify stock plunging 25%. It traded below $60 for weeks before climbing back up to its current level of $66.
That’s an incredible bargain for a stock that could easily be back up near $100 per share by the end of the year. Its earnings report wasn’t even that bad. In fact, it topped analysts’ expectations on numerous metrics.
Shopify reported…
- A 23% increase in revenue, which totaled $1.9 billion.
- A 23% increase in gross merchandise volume totaling $61 billion.
- A 33.5% increase in gross profit ($957 million).
- And adjusted EPS of $0.20, topping projections by 18%.
That’s obviously not bad, but it’s not what analysts were hoping for, either. It fell short of the promise that carried Shopify stock to its $90 peak four months ago.
Still, I’d argue the sell-off was overdone. As I pointed out up top, the e-commerce market is massive and Shopify has carved out a nice little niche for itself. The deal with Target will expand on that, and recent developments in AI will too.
Indeed, Shopify has made some recent strides with AI tools that can be used to write product descriptions, promotional materials, and emails, and generate and enhance images.
So the company will continue to grow. In fact its total sales are expected to climb 20% this year and 19% in 2025. And its EPS is projected to jump another 24%, to $1.23, representing a 272% increase over the last five years.
Shopify stock will see a rise commensurate with that as a result. I’m not the only one who thinks so, either.
Goldman Sachs and JPMorgan both have a $74 price target on Shopify stock, while Evercore ISI pegs it a $75.
Those estimates are likely to prove conservative, too. If growth picks back up, the stock could well test $90 per share again.
Fight on, Jason Simpkins Simpkins is the founder and editor of Secret Stock Files, an investment service that focuses on companies with assets — tangible resources and products that can hold and appreciate in value. He covers mining companies, energy companies, defense contractors, dividend payers, commodities, staples, legacies and more… In 2023 he joined The Wealth Advisory team as a defense market analyst where he reviews and recommends new military and government opportunities that come across his radar, especially those that spin-off healthy, growing income streams. For more on Jason, check out his editor’s page. Be sure to visit our Angel Investment Research channel on YouTube and tune into Jason’s podcasts. Want to hear more from Jason? Sign up to receive emails directly from him ranging from market commentaries to opportunities that he has his eye on. 
