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Shopify Stock Rises Due to Walmart Partnership and Upgrade

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Today, The Financial Post reported that Walmart (NYSE:WMT) has partnered with Shopify (NYSE:SHOP) to expand its marketplace site. According to the article, Jeff Clementz, a Walmart executive, said in an interview that the company wants to add 1,200 Shopify sellers to its market place this year. Currently, Walmart’s marketplace site offers more than 75 million products. In the previous quarter, Walmart’s marketplace site grew at a higher speed than its overall web business. The third-party sellers pay a fee and have to bear the delivery costs, so it’s more profitable for Walmart. Meanwhile, the deal will give Shopify merchants access to Walmart’s customers. So, Shopify’s sales could also get a boost from this deal.

Piper Sandler upgrades Shopify

Today, Piper Sandler upgraded Shopify from a “neutral” to an “overweight” rating. The firm also raised its target price from $773 to $843. The new target price represents a 12-month return potential of 13.5% from its closing price on June 12. As reported by The Fly, Brent Bracelin of Piper Sandler stated that digital commerce penetration could double or triple by 2030 from the current 15% due to the COVID-19 outbreak. He thinks that Shopify, with over 1 million merchants and expanded product offerings, is positioned to benefit from the surge in e-commerce sales. He expects the company’s sales to reach $12 billion by 2025.

Since Shopify reported its first-quarter earnings on May 6, Canaccord Genuity, KeyBanc, Credit Suisse, CIBC, RBC, Jefferies, Mizuho, Eight Capital, and SunTrust Robinson have all raised their target prices. Meanwhile, D.A. Davison and Wells Fargo have downgraded the stock. Among the 30 analysts covering the stock, 36.7% recommend a “buy,” 56.7% recommend a “hold,” and 6.7% recommend a “sell.” As of today, analysts’ consensus target price is $733.40, which represents a fall of 1.2% from the closing price on June 12.

YTD stock performance

The announcement about the partnership with Walmart and Piper Sandler’s upgrade led to a rise in Shopify’s stock price. At 10:46 AM ET today, the company was trading 5.9% higher, while the S&P 500 Index was trading 1.1% lower due to fears about a second wave of COVID-19 infections. Meanwhile, Walmart was trading flat.

So far this year, Shopify has returned 86.8% as of June 12. The expectation of growth in the e-commerce business amid the COVID-19 outbreak and an impressive first-quarter performance led to a rise in the company’s stock price. The company has easily outperformed the broader equity markets. The S&P 500 Index has declined by 5.9%. Walmart has fallen by 1.0% YTD as of June 12.

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