Shopify Inc. (NASDAQ:SHOP) stock fell nearly 8% on Tuesday as investors pulled back from richly valued growth stocks. The decline came even as large-cap technology shares held firm.
The Nasdaq rose 0.12%, while the S&P 500 fell 0.36%. Meanwhile, the Technology sector gained 0.64%.
Shopify’s decline appears more stock-specific than part of a broader technology selloff.
Market breadth remained weak, with an advance-decline ratio of 0.6. Seven of 11 sectors traded lower. However, Technology ranked third among sectors.
Energy led with a 1.19% gain, while Utilities rose 1.07%. The rotation may be adding pressure on higher-multiple growth stocks.
ARK Invest Trims Shopify Stake
Cathie Wood’s ARK Invest recently took profits in Shopify following an August rally of more than 25% that sent the stock above $158.
On Sept. 2, ARK sold 40,392 Shopify shares. The ARK Innovation ETF (BATS:ARKK) sold 35,322 shares. The ARK Next Generation Internet ETF (BATS:ARKW) sold another 5,070 shares.
The sales came after Shopify’s sharp August advance, adding context to the recent profit-taking.
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Strong Financial Performance
Shopify’s underlying business continues to post strong growth. Second-quarter revenue rose 34% year over year to $3.58 billion.
The results provide a fundamental counterpoint to Tuesday’s selloff. However, Shopify’s premium valuation can make the stock more sensitive to shifts in investor risk appetite.
Technical Analysis
Shopify’s longer-term trend remains intact, but its near-term technical picture has weakened.
The stock trades 2.2% above its 200-day simple moving average of $131.27 and 8.2% above its 100-day SMA of $123.96. However, shares are 9.6% below the 20-day SMA of $148.48 and roughly in line with the 50-day SMA of $134.50.
Momentum has also cooled. The MACD sits below its signal line, while the histogram is negative.
Shopify formed a golden cross in August, when its 50-day SMA moved above the 200-day SMA. Still, Tuesday’s decline puts the 50-day average in focus.
Key resistance stands near $159, while support sits around $110.50.
Analyst Outlook
Shopify trades at a price-to-earnings ratio of about 98, reflecting a premium valuation. The stock carries a Buy consensus rating with an average price forecast of $167.38.
Rosenblatt initiated coverage with a Buy rating and $175 price forecast on Aug. 20. Wells Fargo maintained an Overweight rating and raised its forecast to $180 on Aug. 7. Canaccord Genuity maintained a Buy rating and lifted its forecast to $180 on Aug. 6.
Benzinga Edge Rankings
The Benzinga Edge scorecard gives Shopify a Momentum score of 67.37, a Growth score of 71.38 and a Value score of 8.37.
The readings point to solid growth and moderate momentum. However, the weak Value score highlights Shopify’s premium valuation.
Top ETF Exposure
Shopify has a 3.48% weighting in the Baron Technology ETF (NASDAQ:BCTK). It also has a 2.32% weighting in the WisdomTree Global ex-US Quality Growth Fund (NYSE:DNL) and a 0.58% weighting in the ProShares Ultra QQQ Equal Weight ETF (NASDAQ:EQQQ).
SHOP Price Action
Shopify shares were down 7.67% at $133.96 at the time of publication Tuesday, according to Benzinga Pro data.
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