There was no mercy shown for most corners of the stock market during this month’s bloodbath and growth stocks continued to get a sound beating. For example, with 2022 not even one month old, shares of Shopify (SHOP) are down 40% already.
The new environment represents a challenging landscape for many. It is a time, then, for analyst revisions and they are coming thick and fast across the Street. Roth Capital’s Darren Aftahi still views Shopify as “one of the leaders in e-commerce,” but it’s time to readjust his model.
“Although we still view SHOP as a best-in-class stock with increasing international traction and as a global agnostic platform, the pullback in e-commerce multiples has also led to SHOP’s multiple revisions,” the 5-star analyst explained before reducing his price target from $1,650 to $1,400. Nevertheless, there’s still upside of 70% from current levels. (To watch Aftahi’s track record, click here)
The assessment comes against the backdrop of Shopify’s upcoming 4Q21 earnings (anticipated mid-Feb). With a more normalized e-commerce growth rate following the huge strides made on account of the pandemic’s stay-at-home benefits, and due to tough FY20 comps, Aftahi thinks “growth deceleration is likely to continue.” That said, the analyst does expect “another strong quarter,” and based on Roth’s customary quarterly SHOP merchant survey, he believes the results should be “marginally better” compared to his estimates.
Currently, Aftahi’s expectation is for ~30% year-over-year GMV growth, but the median growth amongst those surveyed came in at 31% (down from 3Q21’s 44% YoY growth).
Looking ahead, the analyst believes the recently announced partnership with Chinese online retailer JD.com could “layer on” a new topline catalyst into 2H22. The deal enables U.S. SHOP merchants to sell on JD’s cross-border platform worldwide, including in mainland China, which Aftahi notes, grants SHOP’s merchants access to a new TAM of JD’s more than 500 million Chinese active customers. “With this partnership,” the 5-star analyst explained, “SHOP can ease the barriers to entry for SMB’s and online brands through its JD marketplace integration.”
Turning now to the rest of the Street, where based on 13 Buys and 8 Holds, the stock qualifies with a Moderate Buy consensus rating. The average target is more bullish than Aftahi will allow; at $1,576.84, the figure represents one-year upside of ~91%. (See Shopify stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
