Shopify Inc. could see an earnings tailwind from its adoption of agentic artificial intelligence (AI), according to analysts at the Bank of Nova Scotia who raised their price target and upgraded the Ottawa-based e-commerce company’s stock last week.
“We’ve always said that SHOP should be a core holding; now we’re saying buy the stock,” Scotia’s Kevin Krishnaratne and Richard Chu said in a note on Jan. 5. They upgraded their rating to sector outperform from sector perform on the company, which provides a cloud-based commerce platform for merchants.
Krishnaratne and Chu hiked their price target for shares of Shopify to US$200 from US$165 on the expectation that agentic AI commerce could remake retail similarly to how online shopping transformed the sector. Analysts at RBC Capital Markets, CIBC Capital Markets and National Bank of Canada Capital Markets already have a price target of US$200 on Shopify, according to Bloomberg.
The average 12-month price target on the company is US$175.95 based on the calls of 50 analysts who follow the stock, according to Bloomberg. Shares of Shopify closed Tuesday at US$167.44
The Scotia pair listed three reasons for their optimism on what agentic AI can do for Shopify, including the notion that more accurate “answer engines” will benefit the small- and medium-sized businesses that use Shopify’s services, the expectation that agentic-commerce (a-commerce) will increase e-commerce’s share of retail and that Shopify’s early lead in adopting a-commerce for its merchants places it “well ahead of peers.”
“GenAI’s (generative AI’s) ability to source and aggregate the collective wisdom of every product review, user experience and expert opinion online to deliver recommendations that are perfectly matched to shoppers on a 1×1 basis could be a major unlocking of retail dollars benefiting commerce platforms like SHOP,” the pair said.
Based on the the use of the technology, they are forecasting that gross merchandise value (GMV), a measure of the value of goods sold over a period of time, will increase faster than the consensus of approximately 23 per cent this year, reaching closer to 37 per cent. Longer-term they expect GMV to land somewhere in the middle of those two numbers “for years to come” as AI drives sales activity higher this year before before settling into a medium pace.
Shopify logged a 32 per cent increase in revenue from the year before when it last reported earnings in November citing continued expansion to its AI tools for sellers, which include features that help merchants build their online shops, write product descriptions and generate images.
