Shopify stock price forecast: is it a buy amid valuation concerns?
The Shopify stock price has been in a strong uptrend this year as technology companies soared. SHOP jumped from a low of $69.34 in April to a high of $169.50. This surge has brought its market capitalization to over $213 billion, making it one of the biggest companies in Canada. So, is the highly overvalued company a good investment today?
Shopify stock has jumped as its growth continued
Shopify is a top company that provides e-commerce solutions to retailers and firms in other industries globally. Its main service is a platform that enables users to build e-commerce websites without doing any coding.
Shopify has gained a substantial market share in the past few years because of the quality of its platform. It also offers more features that other website builders don’t have.
The company’s business has been in a growth trajectory in the past few years. Its annual revenue jumped from $2.9 billion in 2020 to over $10 billion in the trailing twelve months.
Most of this growth happened as it continued adding more users to its platform. It also launched more solutions, which helped it to upsell other companies from around the world.
Read more: Shopify shares rise 4% after TD Cowen increases target price
The most recent results showed that the company’s growth trajectory accelerated despite Donald Trump’s tariffs. Its gross merchandise volume jumped from $67 billion to $87 billion in the second quarter of this year.
The quarterly revenue rose by 31% to $2.6 billion, while the operating profit rose to $291 million. Most notably, the company boosted its forward guidance, noting that its revenue would grow at mid-to-high twenties.
Wall Street analysts believe that the company’s third-quarter revenue will be $2.75 billion, up by 27.4% from the same period last year. Its annual revenue is expected to be $11.27 billion, up by 26% from last year.
Valuation concerns remain
The main concern with the Shopify stock is that its stock has always been highly overvalued compared to other technology companies.
Data compiled by SeekingApha shows that it has a forward price-to-earnings ratio of 92, higher than the sector median of 32. Its trailing multiple is 187, also higher than the industry median of 33. On a non-GAAP basis, the company has a forward multiple of 113 and a long-term multiple of 126.
These numbers mean that an investor who bought the whole company would take many years to break even,
However, many investors use the rule-of-40 multiple to value the company. In this, they look at its revenue growth and compare it with the margins.
Shopify has a forward revenue growth of 25% and a profit margin of 23%, giving it a multiple of 48%, making it a relatively cheap company to buy.
Also, it is worth noting that Shopify has perennially been an overvalued company.
Shopify stock price analysis
SHOP stock chart | Source: TradingView
The daily timeframe chart shows that the SHOP stock price has been in a strong rally in the past few months. It has jumped from a low of $69 to $169 earlier this month.
The stock then pulled back and is now trading at $160. It remains above the 50-day and 100-day Exponential Moving Averages (EMA).
Therefore, the stock will likely bounce back as traders wait for the upcoming earnings. If this happens, it will rebound and potentially hit the important milestone at $200.
The post Shopify stock price forecast: is it a buy amid valuation concerns? appeared first on Invezz
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Shopify stock price forecast: is it a buy amid valuation concerns?
The Shopify stock price has been in a strong uptrend this year as technology companies soared. SHOP jumped from a low of $69.34 in April to a high of $169.50. This surge has brought its market capitalization to over $213 billion, making it one of the biggest companies in Canada. So, is the highly overvalued company a good investment today?
Shopify stock has jumped as its growth continued
Shopify is a top company that provides e-commerce solutions to retailers and firms in other industries globally. Its main service is a platform that enables users to build e-commerce websites without doing any coding.
Shopify has gained a substantial market share in the past few years because of the quality of its platform. It also offers more features that other website builders don’t have.
The company’s business has been in a growth trajectory in the past few years. Its annual revenue jumped from $2.9 billion in 2020 to over $10 billion in the trailing twelve months.
Most of this growth happened as it continued adding more users to its platform. It also launched more solutions, which helped it to upsell other companies from around the world.
Read more: Shopify shares rise 4% after TD Cowen increases target price
The most recent results showed that the company’s growth trajectory accelerated despite Donald Trump’s tariffs. Its gross merchandise volume jumped from $67 billion to $87 billion in the second quarter of this year.
The quarterly revenue rose by 31% to $2.6 billion, while the operating profit rose to $291 million. Most notably, the company boosted its forward guidance, noting that its revenue would grow at mid-to-high twenties.
Wall Street analysts believe that the company’s third-quarter revenue will be $2.75 billion, up by 27.4% from the same period last year. Its annual revenue is expected to be $11.27 billion, up by 26% from last year.
Valuation concerns remain
The main concern with the Shopify stock is that its stock has always been highly overvalued compared to other technology companies.
Data compiled by SeekingApha shows that it has a forward price-to-earnings ratio of 92, higher than the sector median of 32. Its trailing multiple is 187, also higher than the industry median of 33. On a non-GAAP basis, the company has a forward multiple of 113 and a long-term multiple of 126.
These numbers mean that an investor who bought the whole company would take many years to break even,
However, many investors use the rule-of-40 multiple to value the company. In this, they look at its revenue growth and compare it with the margins.
Shopify has a forward revenue growth of 25% and a profit margin of 23%, giving it a multiple of 48%, making it a relatively cheap company to buy.
Also, it is worth noting that Shopify has perennially been an overvalued company.
Shopify stock price analysis
SHOP stock chart | Source: TradingView
The daily timeframe chart shows that the SHOP stock price has been in a strong rally in the past few months. It has jumped from a low of $69 to $169 earlier this month.
The stock then pulled back and is now trading at $160. It remains above the 50-day and 100-day Exponential Moving Averages (EMA).
Therefore, the stock will likely bounce back as traders wait for the upcoming earnings. If this happens, it will rebound and potentially hit the important milestone at $200.
The post Shopify stock price forecast: is it a buy amid valuation concerns? appeared first on Invezz
Read More
SoundHound stock continues to defy valuation concerns with new Apivia deal