Shopify Faces Strong Sell Rating as Analyst Questions Aggressive Growth Assumptions

Piper Sandler's Clarke Jeffries downgraded their rating on Shopify (NYSE: SHOP) from Hold to Strong Sell on November 28, 2023. The analyst also lowered their price target by 3.4% from $58 to $56.

In their research note, Jeffries highlighted concerns over Shopify's "untenable valuation" and the stock's rapid post-earnings rally. Despite acknowledging the company's growth potential and profit trajectories supported by factors such as e-commerce penetration, market share opportunity, and take-rate expansion, the analyst cautioned that the current share price reflects overly aggressive growth and profit assumptions.

Jeffries stated, "The growth and profit assumptions embedded into current share price is too aggressive following the stock's 50% post-earnings rally." The analyst further added that Shopify's fundamentals are expected to moderate in 2024 as the company clears events unique to 2023.

According to data from WallStreetZen, Jeffries is ranked in the bottom 6% of all Wall Street analysts, with an average return of -5.3% and a 42.4% win rate. Their specialization lies in the Technology sector.

Currently, 22.2% of top-rated analysts rate Shopify as a Strong Buy or Buy, while 77.8% consider it a Hold. No analysts recommend or strongly recommend selling the stock.

Looking at Shopify's recent performance, the stock price has seen a significant increase of 35.2% since its last quarterly report on September 30, 2023. On a year-over-year basis, Shopify is up by an impressive 94%. During the same period, the stock has outperformed the S&P 500, which has seen a more modest increase of 14.9%.

Shopify, headquartered in Ottawa, Canada, provides a cloud-based e-commerce platform catering to small and medium-sized businesses. Their platform offers various features and services that enable merchants to market and sell products, manage inventory, process payments, fulfill orders, access financing, and leverage analytics and reporting capabilities.

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