Insights

The Curious Reason Shopify Stock Jumped on Tuesday

What happened
Shares of Shopify (NYSE: SHOP) climbed higher on Tuesday, gaining as much as 4.9%. As of 11:22 a.m. ET, the stock was still up 3.1%.
Many stocks were under pressure today, and the e-commerce platform provider received price target reductions from not one but two Wall Street analysts. So why was the stock climbing?
So what
Loop Capital analyst Anthony Chukumba lowered his price target on Shopify to $460, down from $660, maintaining a hold rating on the stock, according to The Fly. Shopify shares are trading just above that revised price target as of this writing. The analyst cited his quarterly channel checks with Shopify merchants and came away with mixed messages. While merchant satisfaction and sales trends were improving, he noted a “slight decline” in the perceived value of the platform among users. Chukumba also cited the continuing shift from online sales back to brick-and-mortar stores. 
Image source: Getty Images.

Wedbush analyst Ygal Arounian had similar misgivings, lowering his price target on Shopify stock to $630 from $937 while maintaining his outperform (buy) rating on the shares, says The Fly. That revised price target suggests potential gains for investors of 39% compared to Monday’s closing price. The analyst said that while Shopify wasn’t immune to the broader trends weighing on e-commerce, he believes the company is well positioned to capture future growth. He also posited that better-than-expected results by rival BigCommerce (NASDAQ: BIGC) suggests that investors could be underestimating Shopify’s potential. 
Now what
The underlying current of these two price target cuts was actually decidedly positive, though uncertainties remain — at least over the short term. Shopify remains the undisputed leader in helping merchants navigate every facet of online retail. However, given the recent deceleration in e-commerce adoption, investors have driven down Shopify’s stock price by more than 70%. It seems the selling is simply overdone.
Given the ongoing secular tailwinds driving digital retail and Shopify’s industry-leading position, investors would do well to think long-term regarding this growth stock and not get too caught up in the quarterly machinations of Wall Street.
Daniel Vena has positions in Shopify and has the following options: long January 2023 $1,140 calls on Shopify and long January 2023 $1,160 calls on Shopify. The Motley Fool has positions in and recommends BigCommerce Holdings, Inc. and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy. –

What happened

Shares of Shopify (NYSE: SHOP) climbed higher on Tuesday, gaining as much as 4.9%. As of 11:22 a.m. ET, the stock was still up 3.1%.

Many stocks were under pressure today, and the e-commerce platform provider received price target reductions from not one but two Wall Street analysts. So why was the stock climbing?

So what

Loop Capital analyst Anthony Chukumba lowered his price target on Shopify to $460, down from $660, maintaining a hold rating on the stock, according to The Fly. Shopify shares are trading just above that revised price target as of this writing. The analyst cited his quarterly channel checks with Shopify merchants and came away with mixed messages. While merchant satisfaction and sales trends were improving, he noted a “slight decline” in the perceived value of the platform among users. Chukumba also cited the continuing shift from online sales back to brick-and-mortar stores. 

Image source: Getty Images.

Wedbush analyst Ygal Arounian had similar misgivings, lowering his price target on Shopify stock to $630 from $937 while maintaining his outperform (buy) rating on the shares, says The Fly. That revised price target suggests potential gains for investors of 39% compared to Monday’s closing price. The analyst said that while Shopify wasn’t immune to the broader trends weighing on e-commerce, he believes the company is well positioned to capture future growth. He also posited that better-than-expected results by rival BigCommerce (NASDAQ: BIGC) suggests that investors could be underestimating Shopify’s potential. 

Now what

The underlying current of these two price target cuts was actually decidedly positive, though uncertainties remain — at least over the short term. Shopify remains the undisputed leader in helping merchants navigate every facet of online retail. However, given the recent deceleration in e-commerce adoption, investors have driven down Shopify’s stock price by more than 70%. It seems the selling is simply overdone.

Given the ongoing secular tailwinds driving digital retail and Shopify’s industry-leading position, investors would do well to think long-term regarding this growth stock and not get too caught up in the quarterly machinations of Wall Street.

Daniel Vena has positions in Shopify and has the following options: long January 2023 $1,140 calls on Shopify and long January 2023 $1,160 calls on Shopify. The Motley Fool has positions in and recommends BigCommerce Holdings, Inc. and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

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