What’s New With Shopify Stock?

Shopify stock (NYSE: SHOP) has declined by close to 21% over the last month, underperforming the broader markets. The technology indices have seen some weakness in recent weeks with the Nasdaq-100 down by 3.5% over the past month. Considering that Shopify has seen a solid rally this year, rising by about 55% since early January, investors could be booking some profit in the stock. That said, Shopify’s financial performance has been reasonably strong. The company posted a better than expected set of Q2 2023 results earlier this month, with revenue growing by 31% year-over-year to $1.7 billion, with adjusted earnings coming in at $0.14 per share, compared to a loss in the year-ago quarter, driven by lower adjusted operating expenses. The company’s profitability could continue to look up following the divestment of its logistics business, with gross margins for the third quarter projected to be about 2% to 3% above the 49.3% recorded in the second quarter due to the sale of the company’s logistics business.

So, is Shopify stock a buy at current levels of about $55 per share? While Shopify valuation multiples are lower versus historical levels, with the stock trading at 10x projected 2023 revenues, down from a range of 20x to 40x seen between 2019 and 2021, the multiple is still a bit high. That said, we think that Shopify’s revenue growth is still likely to remain above the industry average, as the company looks to expand beyond its core base of smaller customers to more large sellers and enterprises. Shopify is also looking to improve its margins further via cost cuts and manpower reductions. Shopify’s decision in early May to abandon a plan to build out a fulfillment business is also a big positive. Investors had always been skeptical about the returns on the build out, given the sizable capital expenditure outlays required, the lower margins of the business, and also due to competition from Amazon
AMZN
, which has a deeply entrenched logistics network. We value Shopify stock at $70 per share, roughly 25% ahead of the current market price. See Shopify Valuation: Is SHOP Stock Expensive Or Cheap? for more details on Shopify’s valuation and Shopify Revenues for more details on the company’s revenue streams and how they are trending.

Shopify stock looks quite undervalued right now and we expect sizable returns from the stock in the near- to mid-term. But what if you’re looking for a high-performance portfolio with a low downside instead? The Trefis Reinforced Value portfolio has beaten the market consistently while limiting losses during periods of sharp market declines.

Invest with Trefis Market Beating Portfolios

See all Trefis Price Estimates