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1 Wall Street analyst thinks Shopify shares will rise to $78 instead of $92. Is this a purchase?

Shopify expects another quarter of double-digit growth, but will it be enough to boost inventory?

Shares Shopify (STORE -3.22%) are trading lower following the company’s first quarter earnings report. The company posted solid earnings and profit growth, and revenues exceeded Wall Street consensus, but it appears the quarter wasn’t strong enough to justify the report’s high expectations.

Bank of America analyst Brad Sills noted the company’s strong performance, but a challenging macroeconomic environment may continue to negatively impact Shopify’s growth in the near term. The analyst has a Neutral (Hold) rating on the stock and lowered his price target from $92 to $78, but that still represents a potential upside of 24% from the current share price.

Can shares be bought?

Despite some weakness in the broader e-commerce market, Shopify’s 23% year-over-year revenue growth this quarter looks very good. Even management’s guidance for second-quarter revenue growth in the teens appears solid. On a non-GAAP (generally accepted accounting principles) basis that excludes the impact of the sale of the logistics business, revenues are expected to grow in the low to mid-20s.

However, a few setbacks could weigh on Shopify’s growth this year. While Shopify sees a resilient consumer in North America, it has seen some softness in consumer spending in Europe. The analyst also sees Shopify’s payments business continuing to put pressure on the company’s gross profit margin, which could potentially impact earnings growth.

Given the mixed near-term outlook, it’s hard to say whether the company’s stock can recover this year and meet the analyst’s target price. Nevertheless, Shopify is still one of the best e-commerce stocks to hold for the long term, especially as it expands its offerings to include artificial intelligence tools that help sellers manage their businesses.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. John Ballard has no position in any of the companies mentioned. The Motley Fool covers and recommends Bank of America and Shopify. The Motley Fool has a disclosure policy.