What’s Happening With Shopify Stock?

SHOP: Shopify logo

Shopify stock (NYSE: SHOP) has done very well this year, rising by 87% since early January, and also remains up by 2.5x from the lows seen in 2022. There have been multiple factors driving the stock higher. Shopify has announced new features in recent months. For example, the company unveiled a new AI chatbot called Sidekick that can carry out tasks for merchants and answer specific questions about the performance of merchant’s business on Shopify-powered websites. The company also announced a partnership with Roku that enables users of the streaming devices to buy products from Shopify merchants with their TV remote. However, a bulk of the gains have come from Shopify’s decision in early May to abandon a plan to build out a fulfillment business. Investors had always been skeptical about the returns on the buildout, given the sizable cash outlays required, the lower margins of the business, and also due to competition from Amazon, which has a deeply entrenched logistics network.

So, is Shopify stock a buy at current levels of about $65 per share? While Shopify valuation multiples are lower versus historical levels, with the stock trading at 12x 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 via cost cuts and manpower reductions. We value Shopify stock at $70 per share, roughly 6% 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. 

What if you’re looking for a portfolio that aims for long-term growth? Here’s a value portfolio that’s done much better than the market since 2016.

Returns Jul 2023
MTD [1]
YTD [1]
Total [2]
 SHOP Return 1% 87% 1416%
 S&P 500 Return 3% 19% 104%
 Trefis Multi-Strategy Portfolio 7% 27% 307%
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[1] Month-to-date and year-to-date as of 7/26/2023
[2] Cumulative total returns since the end of 2016

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