Time to Buy Shopify?

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Time to Buy Shopify?

September 27, 2020 | technology | No Comments

Online shopping has become very prevalent as the rise in COVID numbers continues to result in uncertainty surrounding business reopening efforts. Because of this, Shopify, Inc. (SHOP) has emerged as one of the top eCommerce solution platforms in the market. Shopify is an all-inclusive selling platform that powers over 1 million businesses globally.

Last week, analysts at Goldman Sachs reiterated their Buy rating while raising their price target from $1,286 to $1,318. Shopify, which had a remarkable fiscal year 2020 Q2, is expected to continue to be the backbone of businesses as they are figuring out solutions to outlast the pandemic.

“The F2Q was a landmark quarter for Shopify in many ways, most notably for GMV, which accelerated to 119% growth at a ~$120bn+ annual run rate, on the back of a step-function change in e-commerce penetration from COVID. All the while, Shopify continues to innovate rapidly in solving key pain points for merchants. As a result, we put together a deep dive analysis that estimates the long-term opportunity for the growing number of solutions in Shopify’s merchant solutions suite”, stated the analysts.

On the other hand, today, Loop Capital Markets reiterated their Hold rating while lowering their price target from $1,100 to $1,000. Although the trend has accelerated in the direction of online shopping, the analysts remain conservative on the company. Results from a survey conducted by Loop Capital Markets display concerning signs that will limit Shopify’s potential.

According to the survey, “35% of our survey respondents operate their own online store, while 30% and 22% sell their wares through social media websites and online marketplaces, respectively—all of which declined from 2Q 2020.”

The analysts further noted: ”42% of our survey respondents are somewhat or very satisfied with Shopify, down from 45% in 2Q 2020. 26% are somewhat or very unsatisfied with the platform, down from 27%.”

All in all, Shopify’s current levels of growth and profitability looks to be unclear. With the company trading at a ~45.7x multiple on an enterprise value to estimated 2020 revenue basis, investors should be wary of the consumer trends that could negatively impact the company.

Do you think that now is the time to invest in Shopify or could there be a more attractive entry point for the stock? Leave your thoughts in the comments.

Disclosure: At the time of publication, I have no positions in any of the securities mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for creating this article (other than from TheStreet) and have no business relationship with any company whose stock is mentioned in this article.

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