Stock Analysis & Ideas

Shopify Stock: Current Valuation Looks Attractive, Says Analyst

Story Highlights

Shopify stock has plunged about 79% from its peak as e-commerce trends normalize. Evercore analyst Mark Mahaney finds Shopify’s valuation attractive and sees a 23.5% upside.

Shopify (NYSE:SHOP) (TSE:SHOP) has lost nearly 79% of its value from the 52-week high. This considerable drop in Shopify stock reflects not-so-good first-half performance due to the softness in e-commerce trends. Nevertheless, Evercore ISI analyst Mark Mahaney finds Shopify’s valuation attractive post the recent correction. He maintains a Buy recommendation, while his price target of $45 reflects 23.5% upside potential.

Mahaney stated that Shopify stock has performed “horribly” so far in 2022. However, he sees a “viable Long thesis here.” The analyst added, “SHOP now down to 5X EV/Sales, we find valuation attractive, for long-term investors.”

Mahaney highlighted Shopify’s growing social commerce capabilities and the strengthening of offline retail offerings as positives. Notably, Shopify’s partnerships with YouTube, Instagram, Twitter (NYSE:TWTR), and TikTok add new sales and marketing channels for its merchants. Meanwhile, the growing adoption of its point-of-sale products strengthens its offline retail presence.

Including Mahaney, 12 analysts have rated SHOP stock a Buy. However, with 15 Hold and two Sell recommendations, SHOP stock sports a Moderate Buy rating consensus on TipRanks. 

Who’s Buying the Dip in SHOP Stock?

While analysts are cautiously optimistic about Shopify stock, hedge fund managers and insiders are accumulating SHOP stock on the correction. For context, Hedge funds bought 1.3M SHOP stock in the last three months. This included four hedge funds starting a new position and six increasing their holdings. 

Meanwhile, insiders bought SHOP stock worth $7.1 million in the last quarter. 

Besides hedge funds and insiders, TipRanks’ investors are optimistic about MPLX stock, and 2% of these investors increased their holdings in one month. 

Bottom Line 

The normalization in e-commerce trends, tough year-over-year comparisons, and reopening of physical retail amid widespread vaccination weighed on Shopify’s growth and stock price. 

However, Shopify stock has corrected quite a lot and is trading cheaper than its historical average. Meanwhile, its continued investments in growth initiatives, including strengthening of its fulfillment offerings, point of sale, and social commerce, bode well for growth. Also, comparisons will ease for Shopify in the coming quarters, which should cushion its financials. 

The analysts’ average price target of $43.38 implies 19.1% upside potential.

Disclosure 

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