Is Shopify (SHOP) a Long-Term Bet in an Uncertain Tech Sector?

While retail stores are closing, Shopify (NYSE: SHOP) continues to thrive … And given the company’s performance and fundamentals, it’s not just a fluke. Here’s why SHOP stands out in a competitive sector.

Shopify (NYSE: SHOP) is in an interesting place in the e-commerce world. It’s dependent on e-commerce and retail (to some limited degree) for its client base, but is not always subject to the same trends as them. 

While retail stores might be closing in droves, Shopify itself isn’t doing so badly, riding on the back of the e-commerce disruption of retail. 

While there has been a slight drop in share price recently from the concerns over the tech sector in general, it’s still been doing great since a surge in November of last year, when it showcased strong earnings numbers. It is up about 43% over 1 year.

A slight dip could provide an excellent opportunity for interested investors. Why? First, it has been getting strong recommendations from our own systems as well as analysts across the board:

• SHOP has a Zen Rating of B, indicating it is in the top 20% of stocks we cover. Also, note that stocks with a Zen Rating of B had an average return of +19.88 per year, beating the market average.
• We also break stocks down into component grades. SHOP scores excellently in Momentum, and well in Sentiment and Financials. It is trending well, looks great to other investors, and has strong financial health. And why wouldn’t it? An individual e-commerce store is a gamble at best, but the movement as a whole still has a lot more growth ahead of it.
• Other outlets and analysts view SHOP positively, noting strong recent earnings, calling it a “structural winter” (Andrew Bauch of Wells Fargo), and that there are signs of market share gain momentum (Gabriela Borges of Goldman Sachs). SHOP currently holds a consensus rating of “Buy” from the analysts we track.

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Yet outside of the numbers and recommendations, there is another clear reason to consider Shopify. It is a platform that sellers are interested in, holding a strong market share with more room to grow. And e-commerce is still responsible for only 16% of U.S. retail sales. That percentage is expected to increase. And SHOP will likely be ready.

Reasons to consider SHOP for your portfolio:

• It has a Zen Rating of B, meaning it is among the top 20% of stocks we cover. In particular, SHOP has strong momentum, and some might want to get in and capitalize on this sentiment.
• It has recently showcased strong earnings, and there are no warning signs of a significant downturn for the company. In fact, earnings are expected to post a year-over-year change of +29.4% for this quarter.
• There is still growth to be had in the e-commerce sector, and Shopify is well poised as a dominant platform to make the most of that growth.

We provided a basic breakdown here, and there’s an interesting story behind SHOP, to be sure, but we suspect you’re going to want to do more research before you make any decisions for your portfolio. You need up-to-date details, news stories, and notifications about the tech sector in general (given it’s wont to be volatile). 

For that, we have WallStreetZen Premium, which will give you access to an unlimited watchlist, all the fundamental information you’ll need, and expert analyst opinions. It’s the perfect way to save time while helping to ensure you make the best choices.

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