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) Loses 10% in a Month: Should You Buy the Dip?
Read MoreHide Full Article
Shopify (SHOP - Free Report) shares have declined 10.4% in the past month. Year to date, SHOP shares have lost 23.7%, underperforming the Zacks Computer & Technology sector’s gain of 17.1% and the S&P 500’s 13.3%.
Shopify has been suffering from challenging macroeconomic conditions and persistent inflation. The e-commerce growth rate is now expected to be normal (higher than the pre-COVID level but not supernormal as witnessed during the pandemic), with consumer footfall increasing in offline stores. This factor has been dragging down shares in recent times.
Shopify expects second-quarter 2024 revenue growth in the high teens on a year-over-year basis. Adjusting for a 300-400 bps headwind related to the divestiture of the logistics business, revenues are expected to grow in the low to mid-twenties on a year-over-year basis.
The Zacks Consensus Estimate for second-quarter 2024 revenues is pegged at $2 billion, indicating 18.32% year-over-year growth. The consensus for earnings is pegged at 20 cents per share, down by a penny over the past 30 days.
The gross margin is expected to decrease 50 bps sequentially. Operating expenses, as a percentage of revenues, are expected between 45% and 46%.
Year-to-Date Performance Chart
Image Source: Zacks Investment Research
SHOP Stock to Ride Higher on Strong Merchant Base
Shopify’s long-term prospects are strong given its growing merchant base and an expanding partner base.
Its cloud-based platform is well-positioned to address the growing needs of merchants at a time when social media, mobile devices and data analytics are transforming the e-commerce marketplace.
Merchant-friendly tools like Shop Pay, Shopify Collective, Shopify Audiences, Shopify Capital and Shop Cash offers are helping it win new merchants regularly amid a challenging economic environment. Shopify’s platform is widely used by small and medium businesses that are suffering from persistent inflation.
Integration of Shop Pay Installments into the point-of-sale terminal and general availability of Pro makes it easier for merchants to discover and engage their customers.
In first-quarter 2024, Shop Pay processed $14 billion in Gross Merchandise Volume (GMV) and accounted for 39% of SHOP’s Gross Payments volume (GPV). In the first quarter, GPV grew to $36.2 billion, constituting 60% of GMV processed.
Shopify has been investing profusely in developing the best solutions for modern e-commerce. Product offerings like Shop Pay, Bill Pay, Tax Platform, Collective and the Marketplace Connect app.
Integration of AI through Shopify Magic across products and workflows is helping merchants expand their footprint. Shopify Checkout is helping merchants offer secure and seamless checkout options for customers. In January, the company launched updates, including One-page Checkout and Checkout Extensibility, making it more user-friendly.
Expanding Partner Base: a Key Catalyst for SHOP Stock
An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Amazon (AMZN - Free Report) , Target (TGT - Free Report) , Manhattan Associates (MANH - Free Report) , COACH and Adyen is expected to expand its merchant base further.
Shopify’s strategy to focus on the core business by divesting the logistics business is a noteworthy development. Its partnership with Amazon allows Shopify merchants to use the former’s massive fulfillment network. The relationship with Target also strengthens SHOP’s footprint.
The partnership with Avalara now helps Shopify merchants of any size to easily manage and automate global tax compliance. The collaboration with Manhattan helps it offer world-class unified omnichannel shopping experiences for consumers.
Shopify’s expanding international footprint is noteworthy. In the first quarter, it launched point-of-sale go and point-of-sale terminal in Australia. Expanding the availability of the Markets Pro into international markets is a game changer.
Shopify Trading at a Premium
The Value Style Score of D suggests a stretched valuation for Shopify at this moment, which makes it a risky bet for risk-averse investors.
SHOP stock is trading at a premium with a forward 12-month Price/Sales of 8.11X compared with the Zacks Internet Services industry’s 5.47X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Conclusion
Shopify is benefiting from strong growth in its merchant base. The expansion of back-office merchant solutions to more countries is strengthening SHOP’s international footprint.
Although the current valuation is stretched, the long-term growth prospects are hard to ignore, making the dip an opportunity for investors to jump in.
Shopify currently sports a Zacks Rank #1 (Strong Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Shopify (SHOP) Loses 10% in a Month: Should You Buy the Dip?
Shopify (SHOP - Free Report) shares have declined 10.4% in the past month. Year to date, SHOP shares have lost 23.7%, underperforming the Zacks Computer & Technology sector’s gain of 17.1% and the S&P 500’s 13.3%.
Shopify has been suffering from challenging macroeconomic conditions and persistent inflation. The e-commerce growth rate is now expected to be normal (higher than the pre-COVID level but not supernormal as witnessed during the pandemic), with consumer footfall increasing in offline stores. This factor has been dragging down shares in recent times.
Shopify expects second-quarter 2024 revenue growth in the high teens on a year-over-year basis. Adjusting for a 300-400 bps headwind related to the divestiture of the logistics business, revenues are expected to grow in the low to mid-twenties on a year-over-year basis.
The Zacks Consensus Estimate for second-quarter 2024 revenues is pegged at $2 billion, indicating 18.32% year-over-year growth. The consensus for earnings is pegged at 20 cents per share, down by a penny over the past 30 days.
Shopify Inc. Price and Consensus
Shopify Inc. price-consensus-chart | Shopify Inc. Quote
The gross margin is expected to decrease 50 bps sequentially. Operating expenses, as a percentage of revenues, are expected between 45% and 46%.
Year-to-Date Performance Chart
SHOP Stock to Ride Higher on Strong Merchant Base
Shopify’s long-term prospects are strong given its growing merchant base and an expanding partner base.
Its cloud-based platform is well-positioned to address the growing needs of merchants at a time when social media, mobile devices and data analytics are transforming the e-commerce marketplace.
Merchant-friendly tools like Shop Pay, Shopify Collective, Shopify Audiences, Shopify Capital and Shop Cash offers are helping it win new merchants regularly amid a challenging economic environment. Shopify’s platform is widely used by small and medium businesses that are suffering from persistent inflation.
Integration of Shop Pay Installments into the point-of-sale terminal and general availability of Pro makes it easier for merchants to discover and engage their customers.
In first-quarter 2024, Shop Pay processed $14 billion in Gross Merchandise Volume (GMV) and accounted for 39% of SHOP’s Gross Payments volume (GPV). In the first quarter, GPV grew to $36.2 billion, constituting 60% of GMV processed.
Shopify has been investing profusely in developing the best solutions for modern e-commerce. Product offerings like Shop Pay, Bill Pay, Tax Platform, Collective and the Marketplace Connect app.
Integration of AI through Shopify Magic across products and workflows is helping merchants expand their footprint. Shopify Checkout is helping merchants offer secure and seamless checkout options for customers. In January, the company launched updates, including One-page Checkout and Checkout Extensibility, making it more user-friendly.
Expanding Partner Base: a Key Catalyst for SHOP Stock
An expanding partner base that includes TikTok, Snap, Pinterest, Criteo, IBM, Cognizant, Amazon (AMZN - Free Report) , Target (TGT - Free Report) , Manhattan Associates (MANH - Free Report) , COACH and Adyen is expected to expand its merchant base further.
Shopify’s strategy to focus on the core business by divesting the logistics business is a noteworthy development. Its partnership with Amazon allows Shopify merchants to use the former’s massive fulfillment network. The relationship with Target also strengthens SHOP’s footprint.
The partnership with Avalara now helps Shopify merchants of any size to easily manage and automate global tax compliance. The collaboration with Manhattan helps it offer world-class unified omnichannel shopping experiences for consumers.
Shopify’s expanding international footprint is noteworthy. In the first quarter, it launched point-of-sale go and point-of-sale terminal in Australia. Expanding the availability of the Markets Pro into international markets is a game changer.
Shopify Trading at a Premium
The Value Style Score of D suggests a stretched valuation for Shopify at this moment, which makes it a risky bet for risk-averse investors.
SHOP stock is trading at a premium with a forward 12-month Price/Sales of 8.11X compared with the Zacks Internet Services industry’s 5.47X.
Price/Sales Ratio (F12M)
Conclusion
Shopify is benefiting from strong growth in its merchant base. The expansion of back-office merchant solutions to more countries is strengthening SHOP’s international footprint.
Although the current valuation is stretched, the long-term growth prospects are hard to ignore, making the dip an opportunity for investors to jump in.
Shopify currently sports a Zacks Rank #1 (Strong Buy) and a Growth Score of A, a favorable combination that offers a strong investment opportunity, per the Zacks Proprietary methodology. You can see the complete list of today’s Zacks #1 Rank stocks here.