Insights

Why Shopify Stock Was Climbing Today

What happened
After a rough week to close out April, Shopify (NYSE: SHOP) stock was climbing today as investors looked ahead to the company’s fourth-quarter earnings report, and as two analysts lowered their price targets but maintained their ratings on the stock.
As of 11:51 a.m. ET, Shopify was up 2.5% after climbing as much as 5% earlier in the session. Those gains were also notable because Amazon, which had dragged Shopify lower last week after a weak earnings report, continued to slide today, down 2.9% this morning.
Image source: Getty Images.

So what
Shopify shares plunged as market sentiment continued to move away from high-growth tech stocks, and as Amazon launched its Buy with Prime initiative, which will allow any e-commerce company, including Shopify sellers, to sell to Amazon’s Prime customers and use Amazon’s logistics network. Shopify stock also sank at the end of the month as Amazon reported just 7% top-line growth in its first quarter, sending a warning to the broader e-commerce industry.
Today, however, the market seemed to believe the sell-off was a buying opportunity, especially with the stock down nearly 75% from its peak just a few months ago.
Two analysts weighed in on Shopify’s upcoming report, expected later this week. KeyBanc Capital Markets analyst Josh Beck lowered his price target from $1,000 to $650 to reflect the sell-off, but held his rating at overweight. Beck said that e-commerce trends had been mixed thus far with PayPal offering weak guidance and Amazon reporting a decline in first-party sales. Deutsche Bank’s Bhavin Shah lowered his price target from $900 to $550, maintaining a hold rating, and said he’s expecting the post-pandemic demand normalization to continue when Shopify reports earnings.   
Now what
With the stock rebounding, the market seems to be saying that it thinks Shopify’s decelerating growth is already priced into the stock. Analyst estimates also make clear that the market still expects strong growth from the company. For the first quarter, the consensus is at revenue of $1.59 billion, up 61% from the year-ago quarter, and earnings per share of $0.99, down from $2.01 a year ago.
Given the company’s strong top-line growth, the stock could easily continue to gain if it can hit those numbers.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon, PayPal Holdings, and Shopify. The Motley Fool has positions in and recommends Amazon, PayPal Holdings, 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

After a rough week to close out April, Shopify (NYSE: SHOP) stock was climbing today as investors looked ahead to the company’s fourth-quarter earnings report, and as two analysts lowered their price targets but maintained their ratings on the stock.

As of 11:51 a.m. ET, Shopify was up 2.5% after climbing as much as 5% earlier in the session. Those gains were also notable because Amazon, which had dragged Shopify lower last week after a weak earnings report, continued to slide today, down 2.9% this morning.

Image source: Getty Images.

So what

Shopify shares plunged as market sentiment continued to move away from high-growth tech stocks, and as Amazon launched its Buy with Prime initiative, which will allow any e-commerce company, including Shopify sellers, to sell to Amazon’s Prime customers and use Amazon’s logistics network. Shopify stock also sank at the end of the month as Amazon reported just 7% top-line growth in its first quarter, sending a warning to the broader e-commerce industry.

Today, however, the market seemed to believe the sell-off was a buying opportunity, especially with the stock down nearly 75% from its peak just a few months ago.

Two analysts weighed in on Shopify’s upcoming report, expected later this week. KeyBanc Capital Markets analyst Josh Beck lowered his price target from $1,000 to $650 to reflect the sell-off, but held his rating at overweight. Beck said that e-commerce trends had been mixed thus far with PayPal offering weak guidance and Amazon reporting a decline in first-party sales. Deutsche Bank‘s Bhavin Shah lowered his price target from $900 to $550, maintaining a hold rating, and said he’s expecting the post-pandemic demand normalization to continue when Shopify reports earnings.   

Now what

With the stock rebounding, the market seems to be saying that it thinks Shopify’s decelerating growth is already priced into the stock. Analyst estimates also make clear that the market still expects strong growth from the company. For the first quarter, the consensus is at revenue of $1.59 billion, up 61% from the year-ago quarter, and earnings per share of $0.99, down from $2.01 a year ago.

Given the company’s strong top-line growth, the stock could easily continue to gain if it can hit those numbers.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Amazon, PayPal Holdings, and Shopify. The Motley Fool has positions in and recommends Amazon, PayPal Holdings, 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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