With Shopify's share price down, analysts see a prime entry point before Wednesday’s earnings reveal
A decline in the share price of Shopify Inc. has created what some Wall Street analysts are calling an attractive entry point for investors, especially with the company’s earnings announcement anticipated this Wednesday.
BNN Bloomberg reports that the stock, which is down 15 per cent from its February peak, now has the highest number of buy ratings since 2022. Analysts from BNP Paribas SA, Citigroup SA, and Morgan Stanley have upgraded their ratings to buy-equivalent over the past month.
David Klink, a senior analyst at Huntington National Bank, remains optimistic about Shopify's future in the e-commerce sector despite recent challenges. “We definitely think it has a long-term place in the e-commerce world,” said Klink.
He noted that while Shopify and similar companies have been significantly impacted in recent years, it may be an overcorrection. Shopify shares have faced difficulties, only showing marginal gains in 2024 and underperforming compared to the Nasdaq 100 Index, after a 120 percent rally last year.
While Shopify has outperformed software peers like Five9 Inc. and Squarespace Inc. since early 2023, it has not kept pace with other e-commerce entities such as Affirm Holdings, Inc. and PayPal Holdings, Inc.
However, Citi analysts believe Shopify could be set for a positive surprise, thanks to beneficial trends and cost reductions. “We are more confident Shopify can surprise to the upside,” said Tyler Radke of Citi, who recently upgraded the stock from neutral to buy and raised the price target.
BNP Paribas analysts, led by Stefan Slowinski, also see potential in Shopify, predicting a return to high-twenties revenue growth in 2024, which they believe underscores the stock’s undervalued status.
Yet, there are ongoing concerns about the broader economic environment and potential impacts on consumer spending. Truist Securities maintained a hold rating on Shopify, highlighting its current trading level more than 50 percent below its 2021 peak.
Morgan Stanley analysts suggest that the market might have overreacted to Shopify’s challenges.
“Despite questions around the durability of Shopify’s operating margin expansion following Q4 results, we believe investor expectations have over-corrected,” noted Keith Weiss of Morgan Stanley, supporting his upgrade of the stock to overweight.
The report also briefly mentions other significant tech developments, including Sony Group Corp.’s recent proposal to acquire Paramount Global, which stirred financing concerns, and updates from major companies like Nintendo Co., Nvidia Corp., and Amazon.com Inc., as they navigate through strategic expansions and investments in technology and infrastructure.
