Shopify (NYSE:SHOP)(TSE:SHOP) stock has gained about 28% in a month. Positive developments, including the continued moderation in the inflation rate since June and indications of a slowdown in interest rate hikes, supported SHOP stock. While Shopify stock has bounced back from the lows, an uncertain economic environment could hurt the recovery process and limit the upside.
Is Shopify Stock a Buy, Sell, or Hold?
Due to the uncertainty, Wall Street is cautiously optimistic about Shopify’s stock. Eight analysts have rated SHOP stock a Buy, and an equal number of analysts have Hold recommendations. Overall, it has a Moderate Buy consensus rating on TipRanks.
Shopify’s investments to strengthen its e-commerce platform position it well to capitalize on the digital transformation. The increased amount of gross merchandise volume processed through its payment solutions, the expansion of its products into new markets, the growing adoption of its POS (point-of-sale), Capital, and Market offerings, and investments to strengthen its fulfillment provide a solid base for recovery in Shopify stock.
Moreover, Shopify is up against easier year-over-year comparisons in the coming quarters, implying its growth could accelerate. (Learn more about SHOP’s financials here.)
While Shopify stock is a solid long-term investment, near-term macro headwinds could restrict the upside. Further, SHOP’s forward Enterprise Value/Sales multiple of 7.8x is significantly higher than the sector median of 2.7x.
Shopify is poised to benefit from the ongoing shift in selling models toward digital platforms. Moreover, its strong competitive positioning, investments to strengthen its product base, and increased e-commerce penetration bode well for growth. However, an uncertain economic environment could limit the recovery in the near term.
Shopify has positive signals from hedge funds and insiders who bought its stock last quarter. However, it carries a Neutral Smart Score of five out of 10. Moreover, analysts’ average price target of $41.21 implies 12% upside potential.