Shopify, which reports in US dollars, posted a net income of US$828m for the quarter, an increase from US$718m in the same period last year. Revenue reached US$2.16bn, surpassing the average Bloomberg analyst estimate of US$2.12bn.
In an interview with BNN Bloomberg on Thursday, Toner explained that his rating change was primarily driven by the company’s valuation.
“I valued the company using a 10-year DCF (discounted cashflow), and when I look at what expectations are built into the price here, Shopify is going to need to grow at 20 per cent for 10 years,” he said.
“They’re going to need to get to roughly a trillion dollars in gross merchandise volume in 10 years.”
Toner further noted that he factored in strong free cash flow margins in the mid-twenties but found it challenging to adjust his model much higher, prompting him to “take a little money off the table.”
