Shopify's AI Capabilities Drive Upgrade and Optimistic Growth Forecast

Loop Capital upgrades Shopify, says investors underappreciate the e-commerce giant's AI capabilities

Shopify could surge thanks to its use of artificial intelligence for merchants, according to Loop Capital. The firm upgraded the e-commerce stock to buy from hold in a Friday note and raised its price target to $140 from $110. Loop's forecast calls for nearly 23% upside from Thursday's close. SHOP YTD mountain Shopify stock. Analyst Anthony Chukumba pointed to a looked-over aspect of Shopify's business, which is using artificial intelligence for merchants as well as internally for efforts like customer service and product support. The company employs a suite of products housed in what it calls Shopify Magic, which was first introduced in 2023. This includes features like automatically generated emails and blog posts. "We believe investors are underappreciating how Shopify is utilizing AI to not only better serve its merchants (most notably, under the Shopify Magic umbrella) but also internally (including in customer support, sales, human resources, and even accounting and finance)," Chukumba said. Chukumba added that Shopify's use of AI in its merchant tools will allow the company to grow its revenue at a faster pace than its operating expenses "for the foreseeable future." "We think Shopify will be able to maintain 20%+ growth over the next several years while its operating expenses increase at a much slower rate, which will result in additional operating and free cash flow margin expansion," Chukumba said. Shopify has advanced 46% in 2024. Nearly 30 analysts covering the stock have a buy or strong buy rating on it, according to LSEG. The average price target, however, indicates upside of just 2.3%.

Shopify upgraded to 'buy' as AI initiatives drive growth and efficiency By Investing.com

Investing.com -- Loop Capital upgraded Shopify Inc (NYSE:SHOP) to "buy" from "hold," citing the company's strategic use of artificial intelligence (AI) to boost merchant tools and streamline internal operations. Brokerage raised its price target for Shopify to $140, reflecting a 23% potential upside. Shopify's AI-driven tools, such as those under the Shopify Magic suite, are enhancing merchant experiences with features like personalized recommendations, automated email generation, and multilingual blog posts. Internally, the company has leveraged AI for tasks such as real-time sales call support, HR assistance, and accelerating accounting processes, driving productivity gains and cost efficiencies. "We believe Shopify will be able to grow its revenue at a much faster rate than its operating expenses for the foreseeable future, which will result in operating and free cash flow margin expansion and a higher valuation," analyst wrote. Loop Capital highlighted that these innovations are allowing Shopify to grow revenue at a faster pace than expenses, expanding operating and free cash flow margins. This efficiency, coupled with consistent 20%+ annual sales growth, is expected to further boost Shopify's profitability and valuation. Shopify's reliance on Google (NASDAQ:GOOGL) Cloud infrastructure has also enabled it to avoid significant AI-related capital expenditures, adding to its competitive edge. Loop sees AI as a key driver of margin expansion and long-term growth for Shopify.