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Shopify Stock Jumps on Walmart Deal. Why One Analyst Sees Its Sales Quadrupling.

Shopify shares spiked higher on Monday after the company announced a partnership with Walmart to help merchants on Shopify’s e-commerce platform sell their wares on Walmart.com.

“Starting today, Shopify merchants across the U.S. will be able to apply to sell through Walmart.com,” Shopify (ticker: SHOP) said. “If approved, they’ll be able to connect their Shopify store to their Walmart Seller Account, enabling them to quickly and easily sync their product catalog and create product listings on Walmart.com. By the end of this year, 1,200 Shopify merchants are expected to be able to sell through the Walmart marketplace.”

Shares of Shopify were up 6.6%, to $791.77, on Monday, while Walmart (WMT) was off 0.1%, at $117.59.

Under the agreement, Shopify will automatically keep merchants’ products synced with Walmart.com, “making it easy to track products, or add and manage product information in bulk, saving “time and effort when listing many different products and product variants.” The service will have no monthly fee; merchants will pay referral fees when they make sales.

“We’re excited to be able offer customers an expanded assortment while also giving small businesses access to the surging traffic on Walmart.com,” Jeff Clementz, vice president of Walmart Marketplace said in a blog post Monday. “Shopify powers a dynamic portfolio of third-party sellers who are interested in growing their business through new, trusted channels. This integration will allow approved Shopify sellers to seamlessly list their items on Walmart.com, which gives Walmart customers access to a broader assortment.”

Meanwhile, Piper Sandler analyst Brent Bracelin on Monday raised his rating on Shopify to Overweight from Neutral, with a new price target of $843, up from $733. The call is part of his thesis that the economy is having a “great digital awakening” in a post Covid-19 world.

He says that aside from travel, digital volumes across seven industry segments were up 74% year over year in May, more than twice the growth in the first quarter, driven by strength in digital media, communications, education, retail, and health care. He singles out Shopify and the communications services platform Twilio (TWLO) as having “unique business models where at least 60% of revenue is indirectly tied to transaction volumes or usage.”

Bracelin thinks Shopify’s revenues can quadruple from here by 2025, citing “early signals that Covid-19 could drive a permanent structural industry change to consumer purchasing behavior.” He concedes that the stock is far from cheap on near-term results, but recommends the stock for long-term investors.

“Valuation premium is rich, but warranted looking out beyond 2022,” he writes. “While we acknowledge the sentiment re-rating witnessed this quarter (+80% quarter-to-date) adds a substantial amount of near-term valuation risk, we consider Shopify a franchise cloud software holding for growth investors willing to look out beyond 2022 and would recommend building positions.”

He makes a similar point on Twilio, which is up 110% for the quarter to date He thinks Twilio’s revenues could triple by 2025. Bracelin lifted is rating on Twilio shares to Overweight from Neutral, with a new target of $225, up from $135.

Twilio shares were up 4%, to $199.65, on Monday.

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