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Buy Shopify Stock Down 70% Before Earnings for Huge Long-Term Upside?
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Shopify (SHOP - Free Report) stock has plummeted 70% from its peaks and despite a comeback off its lows, the e-commerce firm is still trading below its pre-covid highs heading into its first quarter fiscal 2023 earnings release on May 4.
Shopify has been punished for slowing growth, but its outlook showcases the continued expansion of and vital role e-commerce plays to companies of all shapes and sizes. It might be time for some risk-taking investors to consider scooping up SHOP stock as it trades for under $50 per share for possible long-term upside.
What’s Going at SHOP?
Shopify grew its revenue by an average of 65% between FY17 and FY21 and it posted even stronger growth in its first few years as a public firm. The company thrived and expanded as companies, small businesses, entrepreneurs, and other entities clamored for website design, marketing, digital payments, apps, analytics, and beyond as digital commerce grew more essential by the day. Shopify benefited from the wave of shoppers who began to flock to digital commerce amid the rise of Amazon (AMZN - Free Report) and others.
Wall Street rewarded Shopify for its breakneck expansion and then crushed the stock when it became clear that its growth would slow. It was never going to be possible to keep posting 50% or higher sales growth and the pandemic pulled forward growth, with its FY2020 sales up 86% from $1.6 billion to $2.9 billion.
Image Source: Zacks Investment Research
SHOP’s FY22 sales still jumped 21% to $5.6 billion, driven by 11% subscription solutions growth and 26% higher merchant solutions. But this tepid growth by Shopify’s own lofty standards simply was not enough to support its lofty valuations, especially as interest rates surged.
Shopify aimed to help make up for slowing expansion as it added fewer merchants by announcing earlier this year that it would boost its pricing for the first time in over a decade. SHOP’s average monthly subscription tiers are now roughly 30% higher on average. And the company offers more options and add ons to help people and companies operate than ever before
Shopify boasted that it captured roughly 10% of the total U.S. e-commerce market in 2022. The company said it reached 561 million unique online shoppers last year across over 175 countries. Zacks estimates call for SHOP’s revenue to climb roughly 20% in both FY23 and FY24 to hit $8.1 billion in 2024.
SHOP’s adjusted EPS are expected to jump 50% this year from $0.04 a share to $0.06 and another 307% in 2024 to $0.24 a share.
SHOP lands a Zacks Rank #3 (Hold) with its consensus EPS estimates mostly stagnant recently. Yet, Shopify’s most accurate/recent EPS estimates came in way above consensus, with FY23’s 69% higher and FY24’s 41% better.
Image Source: Zacks Investment Research
Bottom Line
Shopify stock has soared roughly 1,600% since it late 2015 to blow away Amazon’s 220% and many other growth giants. Yet the stock is now down 25% in the last three years and 70% below its peaks. SHOP is, however, on the upswing alongside Meta (META - Free Report) and many other tech names.
Shopify has climbed 40% in the past six months and it is back up above both its 50-day and 200-day moving averages. Some worry Shopify’s valuations are still too high, with it trading at 8X forward sales vs. the Zacks Tech sector’s 3.4X. This does mark a huge drop from the 49X it traded at several years ago, but it is still steep.
Other investors might instead take a chance on Shopify for under $50 a share for long-term upside potential. And the market has reacted rather positively to reports from Meta and others in recent days.
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Buy Shopify Stock Down 70% Before Earnings for Huge Long-Term Upside?
Shopify (SHOP - Free Report) stock has plummeted 70% from its peaks and despite a comeback off its lows, the e-commerce firm is still trading below its pre-covid highs heading into its first quarter fiscal 2023 earnings release on May 4.
Shopify has been punished for slowing growth, but its outlook showcases the continued expansion of and vital role e-commerce plays to companies of all shapes and sizes. It might be time for some risk-taking investors to consider scooping up SHOP stock as it trades for under $50 per share for possible long-term upside.
What’s Going at SHOP?
Shopify grew its revenue by an average of 65% between FY17 and FY21 and it posted even stronger growth in its first few years as a public firm. The company thrived and expanded as companies, small businesses, entrepreneurs, and other entities clamored for website design, marketing, digital payments, apps, analytics, and beyond as digital commerce grew more essential by the day. Shopify benefited from the wave of shoppers who began to flock to digital commerce amid the rise of Amazon (AMZN - Free Report) and others.
Wall Street rewarded Shopify for its breakneck expansion and then crushed the stock when it became clear that its growth would slow. It was never going to be possible to keep posting 50% or higher sales growth and the pandemic pulled forward growth, with its FY2020 sales up 86% from $1.6 billion to $2.9 billion.
Image Source: Zacks Investment Research
SHOP’s FY22 sales still jumped 21% to $5.6 billion, driven by 11% subscription solutions growth and 26% higher merchant solutions. But this tepid growth by Shopify’s own lofty standards simply was not enough to support its lofty valuations, especially as interest rates surged.
Shopify aimed to help make up for slowing expansion as it added fewer merchants by announcing earlier this year that it would boost its pricing for the first time in over a decade. SHOP’s average monthly subscription tiers are now roughly 30% higher on average. And the company offers more options and add ons to help people and companies operate than ever before
Shopify boasted that it captured roughly 10% of the total U.S. e-commerce market in 2022. The company said it reached 561 million unique online shoppers last year across over 175 countries. Zacks estimates call for SHOP’s revenue to climb roughly 20% in both FY23 and FY24 to hit $8.1 billion in 2024.
SHOP’s adjusted EPS are expected to jump 50% this year from $0.04 a share to $0.06 and another 307% in 2024 to $0.24 a share.
SHOP lands a Zacks Rank #3 (Hold) with its consensus EPS estimates mostly stagnant recently. Yet, Shopify’s most accurate/recent EPS estimates came in way above consensus, with FY23’s 69% higher and FY24’s 41% better.
Image Source: Zacks Investment Research
Bottom Line
Shopify stock has soared roughly 1,600% since it late 2015 to blow away Amazon’s 220% and many other growth giants. Yet the stock is now down 25% in the last three years and 70% below its peaks. SHOP is, however, on the upswing alongside Meta (META - Free Report) and many other tech names.
Shopify has climbed 40% in the past six months and it is back up above both its 50-day and 200-day moving averages. Some worry Shopify’s valuations are still too high, with it trading at 8X forward sales vs. the Zacks Tech sector’s 3.4X. This does mark a huge drop from the 49X it traded at several years ago, but it is still steep.
Other investors might instead take a chance on Shopify for under $50 a share for long-term upside potential. And the market has reacted rather positively to reports from Meta and others in recent days.