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Shopify, In Sweet Spot For E-Commerce Momentum, Gets Upgrade

Shopify ( SHOP ) was upgraded by Pacific Crest Securities on the confidence that strong momentum will continue at the e-commerce company. Pacific Crest analyst Brendan Barnicle upgraded Shopify to an overweight rating and set a price target of 35. Shopify stock was up 3.5%, near 26.75, during afternoon trading in the stock market today . The stock hit a low of 18.58 on Jan. 15 and is up 44% since then. “When we initiated coverage of Shopify we had three concerns: valuation, margins and competition,” Barnicle wrote in his research note. “During the past year, all three of those concerns have declined sufficiently to compel recommending Shopify at current levels.” Shopify provides a cloud-based e-commerce platform that businesses use to build websites and sell goods online and across multiple sales channels, including mobile and social media. The Canadian company raised $131 million on its May 20 initial pubic offering, pricing 7.7 million shares at 17. It reported better-than-expected fourth-quarter earnings on Feb. 17 and provided guidance above expectations. Shopify reported Q4 revenue of $70.2 million, up 99% year over year, and a smaller loss than expected. Revenue has grown at double- and triple-digit rates for the past three years, year over year. The consensus estimate for Q1 in a Thomson Reuters poll of analysts is revenue growth of 79% to $67 million, and a loss of 9 cents per share, minus items. “While competition remains, it seems to have stagnated,” Barnicle wrote. “Shopify is continuing to robustly add new customers to its platform.” He said larger e-commerce software providers servicing the high-end of the market, such as NetSuite ( N ) and Demandware ( DWRE ), are unlikely to move down-market and compete with Shopify in the small-to-midsize business market. He said e-commerce platforms from NetSuite and Demandware are often too expensive and require too many resources to be effective for smaller merchants. “However, Shopify Plus competes for enterprise customers and the company is interested in moving up-market,” Barnicle wrote. Shopify says it was among the first e-commerce providers to add the ability to sell over the leading social media platforms, including Facebook ( FB ) and Twitter ( TWTR ). More than 25% of Shopify merchants have enabled social media selling. In November, Shopify announced a partnership with Facebook that lets shoppers buy Shopify merchants’ products through their Facebook pages. In September, Amazon ( AMZN ) selected Shopify to be its preferred platform for helping small and midsize retailers build and manage online stores. The plan lets Shopify businesses use Amazon’s payment system and other services, part of a plan that Amazon announced a year ago to ultimately shut down its Amazon Webstore business, which provides a similar service. Shopify stock has moved up nine of the last 10 days, and is above its key 50-day line. It gets a not-high IBD Composite Rating of 57 out of a possible 99, factoring in the string of losses in its quarterly reports, and other metrics.

Facebook, Alphabet To Benefit As Digital Ads Overtake TV In 2017

EMarketer expects 2017 to be a watershed year for U.S. digital ad spending. The research firm says that in that year, digital will overtake spending on TV ads for the first time. Digital ad leaders Facebook ( FB ), Alphabet ( GOOGL ) subsidiary Google and Yahoo ( YHOO ) are poised to benefit. In 2016, total digital ad spending is expected to reach 35.8% of all U.S. ad spending, trailing TV ad spending’s 36.8% share, eMarketer said. But next year, digital ad spending will rise to 38.4% of total U.S. ad spending, some $77.37 billion, while TV ad spending will comprise 35.8% of total media ad spending, or $72.01 billion, says eMarketer. “We still expect positive growth for TV ad spend, driven by political advertising and the summer Olympics,” said eMarketer senior forecasting analyst Martin Utreras. “However, we see more ad dollars flowing to digital as a way of optimizing spending in what may be a challenging economic year.” Mobile is continuing to drive growth within overall digital ad spending. Mobile ad spending in the U.S. will rise 38% this year to $43.6 billion, according to the eMarketer report. Mobile will represent 63.4% of total digital ad spending in the U.S. this year, it says. “As consumers continue to increase engagement with mobile devices for daily activities and content consumption, marketers will further integrate all marketing activities — including advertising — to the mobile category,” said Utreras. Video will also gain, with spending on digital video advertising expected to rise 19% to $11.72 billion in 2017 and another 14%, to $13.39 billion, in 2018, eMarketer said. This year, market leader Google is expected to win 38.7% of all digital ad spending in the U.S., eMarketer said. Facebook will come in at No. 2 with a 15% share, while Microsoft ( MSFT ) will control 3.8% of the market. Yahoo will have 3.4% of digital ad spending this year, while Twitter ( TWTR ) will hold 2.4%, according to eMarketer. Among ad buyers committed to start buying advertising on social media sites, eMarketer said that 22% will begin advertising on Snapchat for the first time this year. eMarketer added that 12% planned to start advertising on Pinterest or Facebook’s Instagram, while 10% of respondents planned to begin advertising on Yahoo-owned Tumblr. In January, investment bank Cowen & Co. said that it expects U.S. digital advertising to overtake spending on TV advertising in 2016, a full year ahead of its prior forecast. It based its forecast on its survey of 50 senior U.S. ad buyers. Image provided by Shutterstock .

Can Facebook Live Video Beat Competition From Twitter, Snapchat?

With Twitter ( TWTR ) striving to boost its Periscope live-video streaming service, Facebook ( FB ) must prepare for plenty of competition in the live video streaming segment, wrote Monness Crespi Hardt analyst James Cakmak in an industry note on Monday. One trailblazer has already tossed in the towel, the investment bank said. While live video first grabbed mainstream attention with the meteoric rise of privately held trailblazer Meerkat during the South By Southwest music festival in Texas last year, “Meerkat is now officially pivoting away from live and into social — or, said another way, giving up on live due to competition,” wrote Cakmak. While not a brand new phenomenon, video streamed live remains a “niche” service, said Cakmak. “We expect to see significantly more attention from companies and investors placed on this category as the utility becomes more apparent to mid- and late-stage adopters,” he said. Another indicator of growing attention to the profit potential of live video includes Facebook’s recent rollout of its Facebook Live video streaming service to devices running on  Alphabet ( GOOGL )-owned Google Android and throughout more international markets, Cakmak said. Twitter is also working to better integrate content from its Periscope service into the Twitter news feed, he said. “Given the company’s new identity around (live video), we expect marketing dollars to be put toward this in contrast with Facebook’s largely organic effort,” according to Cakmak. Meanwhile, Meerkat’s strategy change makes it “increasingly clear that between Facebook-owned Snapchat’s utilization and more resources being allocated to Facebook Live and Periscope, we expect attention in this category to only escalate from here,” he said. The recent $175 million funding round of privately held Snapchat, which has 8 billion daily views, will also open up “floodgates” in driving live content and consumption, Cakmak said. Total spending on digital video ads in the U.S. alone is projected to jump by two-thirds to $12.8 billion in 2018 from $7.7 billion this year, according to research group eMarketer. Twitter stock was up a fraction in afternoon trading in the stock market today , near 19. It brushed an all-time low of 13.91 last month. Facebook stock and Alphabet stock were each down more than 1% in afternoon trading. Image provided by Shutterstock .