We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Shopify (SHOP - Free Report) has been one of the hottest stocks in the e-commerce boom we've seen in recent years, with the pandemic proliferating this digital retail transformation. It might be time to pull some profits on this clear-cut COVID winner after reaching all-time highs on Friday (11/19). Analysts are beginning to rein in their overzealous EPS estimates after a disappointing Q3 report pushing the stock into a Zacks Rank #5 (Strong Sell).
SHOP failed to materially break above $1,700 a share after an over 400% 2-year rally on the back of a 3,800% 5-year moonshot. The stock is now trading at an excessive 35.4x price to sales multiple (nearly 500x P/E), which can't be justified by the company's decelerating growth, especially when coupled with this rising interest rate environment.
The Business
Let me start by saying that this is an incredible business model that has exhibited unbelievable operational performance with an amazing profitable growth narrative. However, it looks like euphoric investors have pushed SHOP alittle too far too fast.
Shopify is the biggest threat to Amazon's (AMZN - Free Report) omnipresence in the e-com space as it digitalizes Main Street and breathes life into start-ups and dying brick-and-mortar retailers. Shopify's expanding platform has become a one-stop cloud-based shop for all commerce needs for enterprises of every shape and size.
Shopify's platform powers over 1.7 million businesses' online and in-store commerce from fresh start-ups to household names like Kraft Heinz (KHC - Free Report) , General Mills (GIS - Free Report) , and Logitech (LOGI - Free Report) .
Final Thoughts
Last year, Shopify's push into sudden profitability (initially thought to be years out) exhilarated market participants, and FOMO-ridden momentum has continued to propel this next-generation stock into the stratosphere. It's only a matter of time until gravity inevitably brings this rocket ship back down to reality.
Its significant growth deceleration on top of the Fed's move towards monetary tightening (rising interest rates) will inevitably compress SHOP's excessive valuation multiple.
Consider pulling some profits here as SHOP soars past many analysts' price targets. I like this stock, just not at this crazy valuation. I would be a buyer of this stock on a pullback. $1,300 or lower will be the re-entry price I am looking for with SHOP.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
Bear Of The Day: Shopify (SHOP)
Shopify (SHOP - Free Report) has been one of the hottest stocks in the e-commerce boom we've seen in recent years, with the pandemic proliferating this digital retail transformation. It might be time to pull some profits on this clear-cut COVID winner after reaching all-time highs on Friday (11/19). Analysts are beginning to rein in their overzealous EPS estimates after a disappointing Q3 report pushing the stock into a Zacks Rank #5 (Strong Sell).
SHOP failed to materially break above $1,700 a share after an over 400% 2-year rally on the back of a 3,800% 5-year moonshot. The stock is now trading at an excessive 35.4x price to sales multiple (nearly 500x P/E), which can't be justified by the company's decelerating growth, especially when coupled with this rising interest rate environment.
The Business
Let me start by saying that this is an incredible business model that has exhibited unbelievable operational performance with an amazing profitable growth narrative. However, it looks like euphoric investors have pushed SHOP alittle too far too fast.
Shopify is the biggest threat to Amazon's (AMZN - Free Report) omnipresence in the e-com space as it digitalizes Main Street and breathes life into start-ups and dying brick-and-mortar retailers. Shopify's expanding platform has become a one-stop cloud-based shop for all commerce needs for enterprises of every shape and size.
Shopify's platform powers over 1.7 million businesses' online and in-store commerce from fresh start-ups to household names like Kraft Heinz (KHC - Free Report) , General Mills (GIS - Free Report) , and Logitech (LOGI - Free Report) .
Final Thoughts
Last year, Shopify's push into sudden profitability (initially thought to be years out) exhilarated market participants, and FOMO-ridden momentum has continued to propel this next-generation stock into the stratosphere. It's only a matter of time until gravity inevitably brings this rocket ship back down to reality.
Its significant growth deceleration on top of the Fed's move towards monetary tightening (rising interest rates) will inevitably compress SHOP's excessive valuation multiple.
Consider pulling some profits here as SHOP soars past many analysts' price targets. I like this stock, just not at this crazy valuation. I would be a buyer of this stock on a pullback. $1,300 or lower will be the re-entry price I am looking for with SHOP.