Fears about inflation and weakening e-commerce trends have weighed on Shopify shares.
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Amazon.com ’s weaker-than-expected e-commerce results dampened expectations for Shopify’s own coming quarterly report. An analyst at Wedbush slashed his expectations for the stock on Tuesday, but he’s still upbeat about the firm’s long-term prospects.
Shopify (ticker: SHOP) stock was up 4% to $470.92 in Tuesday trading. Shares of the Ottawa, Canada, e-commerce software firm traded north of $1,600 around the time of the Nasdaq Composite’s peak in November. Fears about how the Federal Reserve will tackle inflation and weakening e-commerce trends have weighed on Shopify shares.
Wedbush analyst Ygal Arounian cut his price target to $630 from $937 in a note on Tuesday, pointing to lower market multiples and e-commerce spending uncertainty in the near future. The new target still implies 33% upside from recent levels.
“Shopify likely hasn’t been immune to the e-commerce cross currents andpressures we are seeing around the space, but we continue to see it as wellpositioned,” Arounian wrote.
He thinks near-term pressures like inflation, supply chain disruptions, and other macroeconomic concerns don’t reflect structural weaknesses for Shopify. Over the long term, he expects Shopify to benefit from gaining market share of the e-commerce market. He thinks the firm’s offerings are key for small and mid-sized businesses that want to incorporate e-commerce options—an important post-Covid-19 trend.
“Shopify remains incredibly well-positioned for the future of commerce, in our view,” Arounian wrote. “While there could certainly be more downside, and we expect continued volatility around e-commerce, we believe the dislocation here will prove to be a strong entry point and buying opportunity.”
For Thursday’s earnings report, he expects the company to report revenue of $1.25 billion, slightly more than the $1.24 billion Wall Street expects. He’s more upbeat about profitability than analysts, with a non-GAAP earnings estimate of $1.20 a share compared with the analyst consensus estimate at 69 cents a share.
Write to Connor Smith at [email protected]
