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Shopify (NYSE:SHOP) was initiated at Hold by Needham Securities on Tuesday with margin compression and macro concerns seen as key issues constraining upside.
Equity analyst Anna Andreeva said that recent price increases should boost earnings results in upcoming quarters. Additionally, a diversification in products offered on the platform has lessened concentration risk, with beauty & health products as well as home appliances helping to lessen focus on just apparel.
That said, Amazon’s (AMZN) Buy with Prime puts pressure on the business, just as consumer discretionary spending could turn for the worse amid a darkening macro backdrop. Additionally, “sustained strength in the labor market could also pressure new business formation,” in her view.
“While we are impressed by SHOP’s TAM opportunity as the model evolves from an online platform for SMBs to e-commerce for anyone, we see downside risk to its more consumer-dependent Merchant Solutions revenue, and think the Street isn’t adequately encompassing margin pressure from the fulfillment network ramp,” she concluded.
Read more on Shopify’s AI integration.
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