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Shopify stock forecast: Can the stock recover?


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Shopify stock forecast: Can the stock recover? Shopify on the phone display.
Shopify stock forecast: Can the stock recover? Photo: Burdun Iliya / Shutterstock.com

Shopify (SHOP) is a Canadian commerce company that provides tools for retail businesses. The company started life as an online snowboard store, and now offers retailers products as diverse as TikTok sales channels, “buy now pay later” options and physical in-store point-of-sale hardware. 

After a bumper pandemic, Shopify now powers over one million businesses in more than 175 countries, with its platform used by brands such as Gymshark, Heinz (KHC) and Staples. May 2022 saw the firm announce its largest ever acquisition – a $2.1bn deal for logistics and delivery startup Deliverr.

The past three months have seen the Shopify share price plummet. Today (10 May) it’s down over 80% on its November 2021 high. The most recent Shopify earnings report proved a mixed bag, and investors are on high alert for signs that online shopping is running out of steam. 

Can the e-commerce giant keep up momentum? We take a look at the latest Shopify stock forecast.

Shopify stock analysis

It has been a turbulent five years for the Shopify share price. Between February 2017 and February 2020, the stock price surged from around $50 to a high of almost $530 – an increase of 960%. 

The rise was driven by the development of an Amazon-style fulfilment centre and soaring customer numbers, which saw Shopify reach one million users by October 2019. 

Even greater share price growth then followed as the coronavirus pandemic hit. Shopify stock entered a bull run in March 2020, rising from $350 on 16 March 2020 to around $1,690 on 15 November 2021 – an increase of around 383%.

As the pandemic forced physical stores to close, consumers flocked online, and 2021 marked Shopify’s ‘biggest year ever’, with the number of merchants using Shopify almost doubling. 

 Shopify stock chart, 2017-2022

After reaching an all-time high of $1,690.60 on 19 November 2021, as seen on the Shopify stock chart, the share price was hit by the bear run that saw US software shares dip 30% between November 2021 and January 2022. 

The new year heralded even more share price volatility when fourth-quarter and full-year results were announced on 16 February 2022. Despite positive earnings figures, CFO Amy Shapero raised the prospect of decelerating retail sales. The share price dropped by over 15% in the days following results. 

On 11 April 2022, Shopify proposed a 10-for-1 stock split, along with plans to protect CEO Tobi Lukte’s voting power, preserving “stability of leadership”. 

The press release stated that the planned share split would also “make share ownership more accessible to all investors”, but markets were not reassured. The Shopify share price reached a post-pandemic low of $416.20 on 27 April 2022, and was again rocked by financial results released on 5 May. 

Mixed second-quarter results saw the share price fall by almost 10% on 5 May as investors feared a slowdown in the pace of online shopping. 

Looking at the Shopify stock technical analysis, the relative strength index (RSI) reading was ‘bullish’ at 29.5 as of the time of writing (10 May). This figure suggests that the stock is undervalued and could see an upwards breakout. 

Latest results

Shopify quarterly results for Q1 2022 were, in short, a mixed bag, with positive headlines often belying decelerating growth. 

The first quarter of 2022 saw the e-commerce giant report revenues of $1.2bn. Though this represented a 22% year on year increase, it did mark a deceleration in its rate of revenue growth. 

Shopify reported adjusted earnings per share (EPS) of $0.20, beating the analyst consensus of -$0.39 by $0.59. This was, however, significantly down on the EPS of $2.01 per diluted share in Q1 of 2021. 

The first three months of the year saw Shopify post a net loss of $1.5bn, compared with net income of 41.3bn for the first quarter of 2021. 

Gross Merchandise Volume (the value of products sold on the platform) increased 16% year on year, however this was roughly half the growth rate reported in Q4 2021. 

But in a show of the company’s enduring confidence in e-commerce, 5 May also saw Shopify announce its $2.1bn acquisition of Deliverr, a US based fulfilment start up. 

Shopify described the move as “doubling down on logistics to help merchants adapt and thrive”. The company hopes to use the Deliverr’s logistics capabilities to facilitate reliable next-day and two-day delivery. 

More measured macro environment

The biggest question mark hanging over Shopify’s stock price forecast is whether demand for online retail will keep pace as the pandemic recedes. 

Analysts have been generally confident that pandemic-induced shopping habits will persist, with Deloitte’s 2022 Retail Industry Outlook finding that even though customers are more comfortable returning to stores, “their preference for online channels remains higher than before the pandemic”. 

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Shopify also remains optimistic, acknowledging in their 2022 outlook that revenue growth was expected to be lower in the first half of 2022 “as the Covid-triggered acceleration of e-commerce in the first half of 2021 from lockdowns and government stimulus is absent from the first half of 2022”. 

What’s more, with US inflation hitting 8.5% in March, shoppers are feeling the squeeze. Shopify’s earnings release acknowledges that the “effects of an inflationary environment on consumer spending” could, alongside other headwinds, prove to “be dilutive to operating margin this year”. 

Unique strengths

But some analysts are confident that Shopify’s model could leave it better placed than rival payments platforms. 

Unlike newer rivals, Shopify operates as a ‘two-sided’ product: a check out solution for customers that has also been adopted by merchants. And this could leave it better placed to withstand a challenging macroeconomic climate. 

“In our view, during the past ten years, new payment methods have found success first by owning one side of the network––either the consumer or the merchant––and then extending distribution to the other side,” said ARKInvest analyst Maximilian Friedrich in a 2 May note.

“Apple Pay owned consumers through the iPhone and WeChat Pay through WeChat, while Shop Pay owned merchants through Shopify’s core merchant product and Alipay through Alibaba,” Friedrich added.

“Consumer-facing payment startups Fast and Bolt learned the hard way how difficult it is to scale into a two-sided product.”

Shopify stock forecast for 2022

As of 10 May 2022, analysts rated Shopify stock a consensus ‘buy’. According to data from MarketBeat, the stock had 20 ‘buy’ ratings, 15 ‘hold’ and one ‘sell’. The average analyst price target for Shopify stock was $927.18, with targets ranging between $2,000 and $400.

CHART

Is Shopify a good stock to buy? Analyst ratings

April 2022 saw Wells Fargo initiate coverage on the stock, issuing an ‘overweight’ rating and a $834 price target, a 14.67% upside on the report date share price. 13 April also saw analysts at Benchmark initiate coverage on the stock, issuing a ‘hold’ rating. 

Since then, 10 further analysts have lowered their Shopify stock price target. On 2 May Keycorp analysts dropped their price target from $1,000 to $650, while analysts at Deutsche Bank slashed their Shopify price target from $900 to $550. 

Further pessimism followed on 3 May, with Wedbush’s Ygal Arounian lowering his Shopify price target from $937 to $630, and Loop Capital’s Anthony Chukumba cutting his from $660 to $460 – which represented just a 0.26% upside on the report date share price.

Desmond Lau at Veritas Investment Research was even more bearish. After Shopify’s first-quarter results were released, he downgraded the stock from a ‘buy’ to a ‘sell’ rating. On 5 May, analysts at Jefferies lowered their Shopify price target from $1,350 to $550 – a drop of almost 60%. 

It’s worth noting that analyst predictions are frequently wrong, and a Shopify share price forecast is no substitute for your own research. Always perform your own due diligence before investing. And never invest or trade money you can’t afford to lose. 

Shopify stock forecast: 2022 - 2025

Looking to the longer term, algorithm-based forecasting service Wallet Investor rated Shopify a “very good long-term investment” at the time of writing (6 May).

Wallet Investor’s Shopify stock predictions use the historical data to inform the stock’s future price movements. The service saw the share price reaching $450.2 by May 2023 and hitting $544 by May 2024. 

Longer term, Wallet Investor’s Shopify stock projections saw the share price reaching $627 by May 2025 and $733 by May 2026. The site didn’t provide Shopify stock price prediction for 2030 or a 10-year forecast, but its 5-year outlook saw the share price hitting $793 by May 2027. 

Note that algorithm-based price predictions can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

FAQs

Is Shopify a good long-term investment?

Is Shopify stock a buy, sell or hold?  Looking to the longer term, algorithm-based forecasting service Wallet Investor rated Shopify a “very good long term investment” at the time of writing, and as of 10 May 2022, analysts rated Shopify stock a consensus ‘buy’.

According to data from MarketBeat, the stock had 20 ‘buy’ ratings, 15 ‘hold’, and one ‘sell’. However, it’s worth noting that analyst predictions are frequently wrong, and forecasts are no substitute for your own research. Always perform your own due diligence before investing. And never invest or trade money you can’t afford to lose.

Will Shopify stock price go up?

As of 10 May, the average twelve-month analyst price target for Shopify stock was $927.18, with targets ranging between $2,000 and $460, according to data from MarketBeat. Wallet Investor's longer term projections saw the Shopify share price reaching $450 by May 2023 and $793 by May 2027.

It’s worth noting that price predictions are frequently wrong, and forecasts are no substitute for your own research. Note that algorithm-based projections can be inaccurate as they are based on past performance, which is no guarantee of future results. Always perform your own due diligence before investing. And never invest or trade money you can’t afford to lose.

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