Sign InShopify's Stock Analysis and Price Predictions: A 'Hold' Recommendation Ahead of Earnings
Summary
Despite concerns about the stock's surge and lack of profitability, Shopify's strong position in the e-commerce sector and bullish technical indicators point to an optimistic outlook, making it a 'Hold' for now, with investors advised to closely monitor the upcoming earnings report. (July 20, 2023)
Introduction
Shopify Inc. (SHOP) is a Canadian multinational e-commerce company listed on the NYSE. As a leading player in the e-commerce industry, the company offers a proprietary platform that enables businesses to create and run online stores. With a massive surge in online sales due to the COVID-19 pandemic, the company has experienced significant growth over the past few years. This report presents a detailed technical and fundamental analysis of Shopify’s stock performance based on latest data, along with predictions for the stock's price on the next trading day (July 21, 2023) and for the upcoming week.
Fundamental Analysis
Shopify's Market Capitalization stands at $83.70 billion, with a high volume of 10.70 million shares being traded, slightly lower than the average volume of 15.28 million shares. These figures indicate significant market interest and liquidity in Shopify's shares. The stock closed at $65.44 on July 20, 2023, marking a decline of 4.09% from the previous trading day. Over the year, the price has ranged from a low of $23.63 to a high of $71.43 illustrating a substantial degree of market volatility.
The company's PE ratio, however, remains negative at -43.63 due to an EPS of -1.5. This is a bearish sign in terms of profitability, suggesting the company is not yet making a profit. This could be a point of concern for potential investors.
Looking at the discounted cash flow (DCF), Shopify's shares are valued at $66.74. This valuation is slightly higher than the last closing price, hinting at some undervaluation of the stock.
Technical Analysis
Technically, Shopify's 50-day moving average at $62.76 is above its 200-day moving average of $45.99, suggesting a bullish market trend. The MACD over the past three months is 0.563647, which is a positive sign reaffirming the overall bullish trend. The RSI14 is 54, indicating that the stock is currently trading in a neutral range, but is leaning towards the overbought territory.
News Analysis and Price Predictions
The recent news around Shopify have been mixed. While there is an overall acknowledgment of the company's benefit from the digital shopping wave, some market analysts have voiced concerns about the stock's price surge. Indeed, its price has almost doubled in 2023, following a 75% drop in 2022. This surge has resulted in some analysts downgrading the stock, cautioning that the risk-reward balance is less compelling.
Based on the current data and considering the upcoming earnings announcement on August 2, 2023, the stock price may witness considerable volatility. We predict that the stock price on the next trading day (July 21, 2023) could be around the DCF valuation of $66.74. Given the bullish technical signals and pending earnings, in the upcoming week, the stock might see a range between the recent price low of $65.02 and the analyst's median target of $73.
Final Evaluation
Despite the mixed news sentiment and the lack of current profitability, Shopify’s strong standing in the e-commerce sector, along with the bullish technical indicators suggests an optimistic outlook for the stock. Therefore, based on the analysis, the stock presents itself as a 'Hold' for the time being. However, investors should closely watch the upcoming earnings report, which could considerably affect the stock’s performance and value.
