Is It Too Late to Buy SHOP Stock?

NYSE: SHOP | Shopify Inc. Cl A News, Ratings, and Charts

SHOP – Although Shopify (SHOP) delivered top-line growth in the last reported quarter and gained 32% year-to-date, let’s see if the stock still has any upside left despite the expected pressure on the bottom line. Read on….

Although Canada-based e-commerce company Shopify Inc.’s (SHOP) latest earnings show an improvement in its top line, softened demand could weigh heavily on its bottom line, as reflected in its soft guidance. Moreover, given the ever-present risk of technological disruption in an intensely competitive industry, it could be wise to avoid this stock for now.

SHOP offers subscription solutions and merchant solutions. Its platform includes a mobile-optimized checkout system to enable merchants’ consumers to buy products over mobile websites.

Despite gaining 8.1% over the past month and 31.9% year-to-date, the stock is down 34.9% over the past year. It closed the last trading session at $45.79.

Let’s closely examine the fundamentals of SHOP.

Weakening Bottom Line

For the fiscal fourth quarter (ended December 31, 2022), SHOP’s revenue and adjusted gross profit increased 25.7% and 16.9% year-over-year to $1.74 billion and $818.84 billion, respectively. However, the company’s adjusted operating income and adjusted net income declined 53.1% and 47.4% year-over-year to $60.99 million and $91 million, respectively.

As a result, SHOP adjusted quarterly net income attributable to shareholders halved to $0.07 per share.

For the fiscal year that ended December 31, 2022, SHOP’s revenue and adjusted gross profit increased 21.4% and 12.1% year-over-year to $5.60 billion and $2.81 billion, respectively. However, the company’s adjusted operating income and adjusted net income came in at $6.06 million and $47.59 million, compared to $717.99 million and $814.39 million, respectively, in the previous fiscal year.

As a result, SHOP adjusted net income for the fiscal year attributable to shareholders came in at $0.04 per share, compared to $0.64 in the previous fiscal year.

Stretched Valuation

Given the recent uptrend, SHOP is trading at a premium compared to its peers. Its forward P/E multiple of 1518.41 and forward EV/EBITDA multiples of 4116.43 are exorbitant compared to the respective industry averages of 20.32 and 13.39.

Similarly, SHOP’s forward EV/Sales, Price/Sales, and Price/Book multiples of 9.03, 9.59, and 7.15 compare unfavorably to the industry averages of 2.70, 2.65, and 3.64, respectively.

POWR Ratings Reflect Fundamental Weakness

SHOP’s overall D rating translates to a Sell in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

Our proprietary rating system also evaluates each stock based on eight distinct categories. SHOP has a D grade for Stability, as reflected in its beta of 2.04 and a high spread between its 52-week high and 52-week low prices of $75.88 and $23.63, respectively.

In addition, SHOP has a D grade for Value and Momentum, consistent with its stretched valuations despite the long-term downtrend in price action.

Unsurprisingly, SHOP is ranked #25 of 28 stocks in the Internet – Services industry.

Click here to see additional POWR Ratings for Growth, Sentiment, and Quality for SHOP.

Bottom Line

For the first quarter of fiscal 2023, SHOP has forecasted its revenue growth to be in the high-teens percentage on a year-over-year basis.

With inflation and rising interest rates expected to keep weighing on consumer spending, SHOP is expected to incur a loss of $0.04 per share in the first quarter, compared to an EPS of $0.02 in the year-ago quarter. The company’s EPS for the fiscal year is expected to decrease 26% year-over-year to $0.03.

While its current outlook stands out in stark contrast to its pandemic boom, SHOP’s core activities in a softening market have been facing unrelenting pressure from competition on both livestream shopping and logistics fronts, the latter of which is being countered through the acquisition of Deliverr and partnership with Flexport.

Hence, given SHOP’s uphill task amid macroeconomic headwinds, it could be wise to steer clear of this overvalued and volatile stock for now.

Stocks to consider instead of Shopify Inc. (SHOP)

Unfortunately, the odds of SHOP outperforming in the weeks and months ahead are greatly compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these 3 B-rated (Buy) stocks from the Internet – Services industry instead:

Shutterstock, Inc. (SSTK)

Perion Network Ltd. (PERI)

Liquidity Services, Inc. (LQDT)

What To Do Next?

Get your hands on this special report:

7 SEVERELY Undervalued Stocks

The best part of the recent bear market is that there are thriving companies trading at tremendous discounts to fair value.

This combination of stellar earnings growth and low price provides a great catalyst for investor success.

And this report focuses on the 7 best of these stocks primed to soar in the weeks ahead. Click below to claim your copy now.

7 SEVERELY Undervalued Stocks


SHOP shares were trading at $44.88 per share on Friday morning, down $0.91 (-1.99%). Year-to-date, SHOP has gained 29.30%, versus a 2.71% rise in the benchmark S&P 500 index during the same period.


About the Author: Santanu Roy


Having been fascinated by the traditional and evolving factors that affect investment decisions, Santanu decided to pursue a career as an investment analyst. Prior to his switch to investment research, he was a process associate at Cognizant. With a master's degree in business administration and a fundamental approach to analyzing businesses, he aims to help retail investors identify the best long-term investment opportunities. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
SHOPGet RatingGet RatingGet Rating
SSTKGet RatingGet RatingGet Rating
PERIGet RatingGet RatingGet Rating
LQDTGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


Is This REALLY a Bull Market?

The S&P 500 (SPY) keeps making record highs...but does that mean that market conditions are truly bullish? 44 year investment veteran shines a light on how hollow recent gains are as they are only accruing to a handful of stocks with most investors searching high and low for stock market gains. Read on for more...

Unveiling Adobe (ADBE) Q2 Earnings: What Lies Ahead for Investors?

Software giant Adobe Inc. (ADBE) has released its second-quarter earnings, revealing double-digit growth in both revenue and profits. Yet, concerns arise around the complexities of navigating growth in the face of advancing AI technologies. Let’s analyze ADBE’s recent performance and assess key fundamentals to uncover what lies ahead for investors…

3 AI Stocks to Invest in for the Next Technological Revolution

The AI market is experiencing a significant growth trajectory, driven by widespread application across various industries. Hence, it could be wise to invest in top AI stocks, Alphabet (GOOGL), Meta Platforms (META), and Alibaba Group Holding (BABA) for the next technological revolution. Read more...

Analyzing Broadcom’s (AVGO) Q2 Earnings: Worth Investing?

Driven by a surge in demand for its AI products, Broadcom (AVGO) reported robust earnings in its latest quarterly results, exceeding expectations on both top and bottom lines. However, is the stock’s recent announcement of a 10-for-1 stock split worth investing in? Keep reading to find out…

Bullish or Bearish Stock Set Up?

The S&P 500 (SPY) record highs sounds pretty darn bullish on the surface. Yet as we dig below the surface there are some curious signals that point more Risk Off. This is especially true as we come into the next Fed meeting after a round of data that points to inflation still being too high...only further delaying the first rate cut. What does this all mean for stocks from here? Steve Reitmeister offers his latest views on the market outlook along with a preview of his top picks to stay on step ahead of the market. Read on for more...

Read More Stories

More Shopify Inc. Cl A (SHOP) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All SHOP News