03:40 PM EDT, 07/16/2024 (MT Newswires) -- Shopify ( SHOP ) is expected to see "solid" revenue growth in the coming years amid steady share gains in the e-commerce industry and disciplined expense spending, BofA Securities said Tuesday.

The e-commerce platform has consistently gained market share, with its North America gross merchandise volume compounding at 39% annually for the last five years, which BofA said was more than two times overall US e-commerce growth.

Shopify's ( SHOP ) North America GMV represented 14% of US e-commerce sales as of 2023, up from 6% in 2018, while its global GMV represents 4.9% of world e-commerce sales, up from 1.6%, according to BofA. The brokerage expects Shopify ( SHOP ) to continue gaining share of the $5.2 trillion global e-commerce industry in the core small and medium merchant segment. The company's strategy of targeting the enterprise segment is also likely to help accelerate market share gains, BofA said.

"Following years of declining margin, we believe that the company has turned a corner on balanced growth and margin under new CFO Jeff Hoffmeister," BofA analyst Brad Sills said in a note to clients. "The Shopify ( SHOP ) platform is well-suited for merchants who wish to maintain their own brand outside of large marketplaces like Amazon ( AMZN ) ."

Hoffmeister joined the company as CFO in October 2022.

The firm upgraded its rating on the Shopify ( SHOP ) stock to buy from neutral and raised its price objective to $82 from $78. The company's US-listed shares were up 8.1% in Tuesday late-afternoon trade.

The brokerage's upside scenario calls for 2030 revenue of $29.36 billion, representing a 22% compound annual growth rate over the next six years, according to the note. That compares with BofA's base case estimate of $23.12 billion by 2030, versus approximately $7 billion in revenue reported for 2023.

"We forecast solid revenue growth and (free cash flow) conversion from here, driven by solid high-single-digit baseline e-commerce growth, steady share gains, and disciplined expense spending," Sills wrote.

Shopify's ( SHOP ) gross margin has dropped 650 basis points since 2017 to 50.3% last year amid "outsized" growth from payments, the analyst said. Shopify ( SHOP ) announced a 20% workforce reduction in May 2023.

BofA expects the company's margins to expand by 260, 200 and 120 basis points in 2024, 2025 and 2026, respectively.

Price: 69.88, Change: +5.67, Percent Change: +8.83