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Stock Analysis & Ideas

Is a Recovery in the Cards for Shopify Stock?

Story Highlights

Shopify stock is trading at a multi-year low. An uncertain macro environment and a slowdown in growth pose challenges.

The recent sell-off in Shopify (NYSE: SHOP) (TSE: SHOP) stock eroded a significant amount of its shareholders’ wealth. Notably, shares of this internet-based commerce platform provider have fallen by more than 81% from its 52-week high. 

Shopify stock is trading at a multi-year low due to the tough year-over-year comparisons, the absence of pandemic-led demand and government stimulus, and the reopening of physical retail. 

Now What?

While Shopify stock has declined quite a lot, the uncertain macro environment and concerns around consumer spending limit the upside in the short term. 

Deutsche Bank analyst Bhavin Shah, who remains sidelined on SHOP stock, stated, “We continue to view Shopify as a quality operator with the potential to become the de facto OS for e-commerce merchants and feel incrementally better about SFN post 1Q results.”

However, the analyst cited uncertainties, fading e-commerce tailwinds, and increasing competition for his Hold recommendation. 

Though Shopify faces near-term challenges, management remains upbeat and expects to benefit from its aggressive investments in growth. Further, SHOP faces easier year-over-year comparisons, which is a positive. 

In response to Shopify’s ongoing investments in infrastructure and growth, Jefferies analyst Samad Samana stated, “While some investors may be frustrated by the acceleration in spend in light of the tougher macro and rising rates, we remain supportive of increased NT [near term] growth-related investments given SHOP’s LT [long term] ambitions and competitive positioning.”

Samana is bullish on SHOP stock. However, he lowered his 2022 revenue estimate to account for macro headwinds.

Including Samana, SHOP stock has received 15 Buy recommendations. Moreover, it has 11 Holds and two Sell ratings. 

Overall, SHOP stock has a Moderate Buy consensus rating on TipRanks due to the near-term headwinds. Further, due to the significant correction, the average Shopify price target of $607.14 implies 85% upside potential. 

Bottom Line

Undeniably, Shopify is going through a rough patch. However, most of SHOP’s challenges are transitory. Besides, easier comparisons in the coming quarters, benefits from its investments, and the ongoing digital transformation offers Shopify a multi-year growth platform. 

Disclosure

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