Shopify (NASDAQ:SHOP) stock has slumped in the past few weeks, falling from its August high of $158 to $128 today. The stock has underperformed the broader market this year, dropping 19% since January while the S&P 500 has gained more than 10%. This performance has pushed some analysts, including one from Bernstein, to boost their outlook.
Bernstein Upgrades Shopify Stock
In a note this week, Mark Shmulik, a Bernstein analyst, said that the company was primed for a rebound. He noted that the sell-off was mostly because of the sector-wide retreat of software companies, which is widely known as SaaSpocalypse.
He added that the company’s fundamentals were still strong, with its revenue and profitability continuing to rise. He now expects that the stock will jump to $160, implying a 25% upside from the current level, saying:
"For whatever headwinds Shopify faces. AI further reduces the entry barriers for the next generation of builders and expands the market. Expect Shopify to be there, enabling those commerce dreams."
Other top analysts are bullish on Shopify stock. Piper Sandler’s James Callahan hiked his target from $172 to $180, while Rosenblatt Securities’ Scott Devitt hiked to $175. Royal Bank of Canada sees the stock rising to $180. Benzinga data shows that the consensus target among analysts is $168.
Shopify’s Business is Still Growing
The most recent results showed that Shopify’s revenue jumped by 34% in the second quarter to $3.58 billion. Its gross profit soared to $1.7 billion, while its free cash flow rose from $422 million to $654 million.
Analysts expect that its organic growth will continue in the coming quarters. Its third-quarter revenue is expected to grow by 31.4% to over $3.74 billion. The annual revenue this year is expected to grow by 31.8% to $15.2 billion, with its earnings per share (EPS) continuing its strong trajectory.
A key challenge, however, is that the forward price-to-earnings multiples show that it is a highly expensive company. It has a trailing twelve-month (TTM) price-to-earnings ratio is 80, while the forward multiple is 67. These numbers are much higher than that of other companies.
Shopify Shares Landed at a Crucial Support
The daily chart shows that SHOP stock has pulled back from a high of $158.7 to the current $128.80. It has landed at a crucial support that coincides with the ascending trendline that connects the lowest swings since May this year.
Shopify also settled along the 200-day Exponential Moving Average (EMA) and the Major S/R pivot level of the Murrey Math Lines tool. Therefore, the stock will likely rebound, potentially to the Ultimate Resistance level of $150.
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