Shopify Stock: What Are Analysts’ Concerns Right Now?



Shopify (NYSE:SHOP) stock declined 1.91% on May 8 and closed at $708.97 with a market cap of $83.0 billion. The stock was trading 4.1% below its 52-week high of $739.24. Meanwhile, the stock was trading 192.7% above its 52-week low of $242.23.

So far, Shopify stock has had an impressive rally this year. The e-commerce giant has returned over 78% as of May 8. The gain is significant considering the current situation. Many companies have been struggling due to COVID-19. During the crisis, Shopify has helped more entrepreneurs start their businesses on its platform, which is evident from its impressive first-quarter results. In an effort to boost the platform, Shopify also “extended 90-day free trial for all new standard plan signups,” according to a press release. The company bolstered gift cards for its merchants and introduced local in-store pick-up and delivery.

However, many analysts have downgraded Shopify stock despite its strong growth and returns. Why are analysts concerned?

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Analysts downgraded Shopify stock

On May 7, Wells Fargo analyst Timothy Willi downgraded its rating on Shopify stock from “overweight” to “equal-weight.” The analyst thinks that the company’s strong growth prospects are already priced in the stock. Notably, the company has benefited from a shift to online and omnichannel commerce amid the pandemic. Shopify charges subscription fees from merchants for selling their goods on its platform. The company also charges a fee for providing payment processing services to vendors. Willi raised his target price from $500 to $700.

On the same day, D.A. Davidson analyst Tom Forte slashed its rating on Shopify stock to “neutral” from “buy.” According to a report from TheFly, Forte is concerned about Shopify’s decelerating monthly recurring growth, which has come down to 25.3% from 36% in the same period last year. Forte thinks that more merchants are canceling and downgrading Shopify services. He sees fewer international merchants on the company’s platform, which adds to his concerns. Meanwhile, Forte raised his target price to $650 from $400. He thinks that the stock deserves a premium valuation.

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Canaccord Genuity analyst David Hynes also downgraded Shopify stock to “hold” from “buy” on April 30. The analyst cited an expensive valuation as the reason for the downgrade. According to a report from TheFly, “he’s not convinced that Shopify’s gross merchandise volume are as bulletproof as perceived as discretionary spend retreats. If the economy sharply contracts due to the pandemic, demand for the nice-to-haves, which are a large part of the inventory of Shopify merchants, is almost surely to fall.” Hynes reiterated a target price of $600.

My take on Shopify

Looking at the analysts’ views, I think that Shopify stock is trading at its highs. Investors should wait for the dip to buy the stock. Meanwhile, interested investors could also consider the overhangs related to the stock.


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