Shopify (SHOP) is rocking what you need to know

What happened:

Shares of e-commerce software platform Shopify ( NYSE:SHOP ) rose 5.4% in the morning session after a Goldman Sachs analyst upgraded the stock from Neutral to Buy and raised his price target from $64 to $74. The new target price represents a 25% premium to the share price when the increase was announced. The analyst added: “Given Shopify’s significant technology moat in eCommerce software and its share of earnings in eCommerce cycles, we believe these investments will deliver more sustained revenue growth at scale.” After an initial surge, share prices fell to $58.64, up 2.8% from the previous close.

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What the market tells us:

Shopify stock is highly volatile, with 18 moves greater than 5% over the past year. In the context of this, today’s move indicates that the market considers this news significant, but not something that would fundamentally change its perception of the business.

The previous big move we reported on was 14 days ago, when the company’s shares fell 19.9% ​​on news that the company had released first-quarter results and provided second-quarter revenue guidance, which signaled a slowdown in growth. Shopify expects revenue to grow at a mid-teens percent year-over-year rate in the second quarter of 2024. This is a significant decline compared to the low twenty percent growth recorded in the first quarter. On a more positive note, both GMV (gross merchandise value) and revenue were slightly above analyst estimates for the quarter. It is worth noting that the scale of these hits was smaller and less convincing than in previous quarters. EPS defeated by a more convincing margin. Gross margin improved and the business continued to generate positive cash flow. Overall, it was a mixed quarter for the company, with the market likely concerned about the weaker growth outlook for a company trading at a fairly high valuation.

Shopify is down 20.7% year-to-date and at $58.64 per share is 35.4% below its 52-week high of $90.72 in February 2024. Investors who bought Shopify stock 5 years ago worth $1,000, they will now be looking at a $2,099 investment.

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