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Craig Miller, Chief Marketing Officer and Head of Product at Shopify, is photographed in the company's Toronto offices on Nov 24 2016.Fred Lum/The Globe and Mail

This year’s blistering rally in Shopify Inc. shares is raising questions about the stock’s valuation and it is exposing a curious dichotomy among analysts based on their home bases: The only notes of caution come from U.S. analysts, while Canadians are overwhelmingly bullish.

The differing opinions look particularly interesting given Shopify’s gains. The stock has soared 88 per cent in 2019, making it the top performer in the S&P/TSX Composite Index and adding to its allure as a momentum play.

Since the company’s initial public offering, in 2015, the share price has risen more than 15-fold amid a strong uptake in the Ottawa-based company’s e-commerce platform among online merchants.

The latest rally follows upbeat first quarter financial results on Tuesday, when Shopify surpassed expectations with impressive growth beyond English-speaking markets. Over all, revenue increased 50 per cent in the quarter, year over year, to US$320.5-million.

But profits remain elusive. And while losing money on an annual basis isn’t unusual for a relatively new technology company that is growing fast, it can make valuing the stock a little tricky.

Among the 27 analysts who cover Shopify, 19 have buy recommendations, according to Bloomberg. Just seven analysts have hold recommendations and one analyst says the stock should be avoided altogether.

What’s interesting is that the analysts who are either skeptical or lukewarm toward Shopify are based outside of Canada and work for non-Canadian financial firms, creating a curious divide.

Analysts at Morgan Stanley, Piper Jaffray Cos., SunTrust Robinson Humphrey Inc., Jefferies Group LLC, William Blair & Co., Oppenheimer & Co. Inc. and Barclays PLC stand apart from the bullish pack with lukewarm hold recommendations. The sole sell recommendation comes from Morningstar Inc.

We’ve seen this sort of divide before. In 2010, when the shares of BlackBerry Ltd. (then known as Research In Motion Ltd.) were stumbling, Canadian analysts had target prices that were 44 per cent higher than those of non-Canadian analysts. In a Globe and Mail article at the time, I found that Canadian-based brokerages were also more bullish toward other Canadian companies with global profiles, such as Magna International Inc. and Barrick Gold Corp.

The best explanation: Canadian analysts are largely confined to Canadian companies, while non-Canadian analysts have a bigger pool of companies from which to draw their favourite picks.

The skeptical take was the right one in the case of BlackBerry, whose shares bottomed out in 2013. Are the skeptics right about Shopify, too?

The divide largely comes down to views on valuation.

Todd Coupland, an analyst at CIBC World Markets – who, like analysts at RBC Dominion Securities Inc., National Bank Financial, Canaccord Genuity Group Inc. and Mackie Research Capital Corp., has a buy recommendation on Shopify – expects that the shares will trade at 13 times estimated 2020 revenue, which is in line with some technology peers.

“Recall that Amazon, Facebook, Google and all traded at a minimum of 10 times one-year forward revenue for four to five years after going public,” Mr. Coupland said in a note.

However, Koji Ikeda, an analyst at Oppenheimer, found that Shopify’s first-quarter results, while strong, had some uninspiring elements: Revenue beat analysts’ expectations by a ho-hum 4 per cent and the company’s increase in revenue guidance (from US$1.48-billion to US$1.5-billion) for the full year was slight.

“Shopify is clearly taking share and is a disruptor in the massive shift to digital commerce opportunity. However, Shopify is one of the most expensive names in SaaS [software as a service], by our analysis, and we wait on the sidelines for a better entry point,” Mr. Ikeda said in a note.

Michael Olson, an analyst at Piper Jaffray, agrees. Since Shopify is not profitable, he used a valuation that compared the share price at the end of April to the company’s enterprise value divided by estimated 2020 gross profit. The number: 22.6, which is the highest valuation among SaaS peers (including Paycom Software Inc., ServiceNow Inc. and PayPal Holdings Inc.).

“We continue to view Shopify as a strong growth story executing well and holding a strong market position, but given the relatively higher current valuation ... we stay Neutral rated on SHOP shares,” Mr. Olson said in a note. Neutral is equivalent to a hold recommendation.

But the divide between Canadian and non-Canadian analysts is only so deep. With Shopify’s share price soaring to new heights, most analysts – on both sides of the border — have been raising their target prices aggressively, by an average of US$60 over the past week alone.

The stock closed the week at US$264.05 in New York, which is slightly above the average analyst target of US$259. So you can expect either more increases to target prices — or rising skepticism over Shopify’s valuation.