Benchmark upgraded Shopify (SHOP, Financials) to a "buy" rating from "hold" ahead of its fourth-quarter earnings report, citing expectations of strong business performance and the continued expansion of its digital commerce ecosystem.

• Warning! GuruFocus has detected 5 Warning Signs with SHOP.

Emphasizing its part in improving conversion rates for businesses, the research company identified Shopify Audiences as a major growth engine. Leveraging aggregated data to enhance ad targeting, Shopify Audiences has been gaining popularity and Benchmark expects it to positively impact gross merchandise volume. Benchmark expects GMV for the fourth quarter to be $93.37 billion; revenue is expected at $2.76 billion and operating income is projected to be $442 million.Apart from its near-term performance, Benchmark indicates that Shopify's long-term expansion prospects remain positive. The business mentioned its continuous development into artificial intelligence-driven marketing solutions meant to improve campaign optimization, bidding methods, and budget allocation. Generative artificial intelligence technologies are supposed to be integrated by Shopify to help companies with content development and tailored advertising.The research note highlights yet another important development: Shopify's investigation of retail media networks. The corporation is developing an ad extension tool that would let stores access fresh advertising opportunities. Benchmark thinks this program might start as late as late 2025 or early 2026, therefore reinforcing Shopify's competitive edge in the e-commerce space.Reflecting a predicted upside of double digits, Benchmark set a price target of $150 for Shopify stock from its present position. The company observed that ongoing expansion is most likely driven by Shopify's emphasis on creativity and smart investments in digital marketing infrastructure.

Shopify is scheduled to release its fourth-quarter earnings results before the market opens on Feb. 11.