• Valuation, inflation and growth challenges should weigh on Shopify (SHOP) shares.
• Shopify bulls see a historically low sales multiple and large runway ahead.
• Investors should be ready to buy SHOP stock.

Shopify (NYSE:SHOP) stock slid nearly 12.50% to start the trading week amid mostly quieter consolidation in the broader averages.

Outwardly, it was an unusually brutal session for SHOP stock investors. But the selling pressure did follow Friday’s single session gain of 18.65% and weekly reclamation of 43.28% in share price.

Those booking profits or simply closing long SHOP positions may have had other motivation too. Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google debuted its comprehensive Last Mile Fleet Solution, and it’s potentially bad news for SHOP stock.

The diversified tech giant’s service is layered on top of the company’s On-demand Rides & Deliveries solution on Google Maps.

The Google solution looks to help merchants better manage and optimize transactions from the initial order to the doorstep. And it’s positioned to challenge SHOP stock’s Shopify Fulfillment Network whose bread and butter is small-to-mid-sized retail customers.

Ticker	Company	Current Price
SHOP	Shopify	$715

SHOP Stock Bears Warn It’s Not Just Google

Time will tell whether competition from Google actually eats into Shopify’s business. Ever hear of Google Glass? The point is, even Alphabet doesn’t always win.

Also, GOOG investors didn’t read too much into the Last Mile Delivery news as a sure thing. Similar to a modestly pressured Nasdaq, Alphabet shares were off by about 0.25% in closing out Monday.

Still, SHOP stock’s bears have been sounding the alarm bells and mostly winning — other than last week — since the fourth quarter of 2021.

From an all-time-high of $1762.92 set on Nov. 17, Shopify shares are off 61%. And at last Monday’s weakest, the substantial bear market trimmed as much as 71% off the stock.

It hasn’t been without cause of course. The specter of inflation eating into consumer spending habits, attached-at-the-hip slower sales growth, contracting profit margins and a broader, prolonged exodus out of higher-multiple stocks have all played a hand in Shopify’s bearish cycle.

What’s more, the case for SHOP stock remaining pricey, continues to be a problem for some investors.

For one, profits this year will be moving in the wrong direction. And a free cash flow multiple north of 150x, relative to Shopify’s $68 billion valuation, is not exactly blue-chip ready.

InvestorPlace’s Mark Hake posits weaker-than-forecasted growth rates and SHOP’s sales ratio around 10.5x could send shares modestly below $550.

The Bull Case for Shopify

No disrespect to Mark, but a week ago, Shopify shares fetched as little as $510. Was the roughly 6.5% discount to his price target sufficiently large to consider a purchase? That went unanswered.

Yet others did answer the call and profited handsomely. Not that the market is always correct. Agreeably though, Shopify’s rally would be quite the reactive overshoot if there wasn’t embedded value.

And investors that are more upbeat on SHOP stock do have reasons to support those buy decisions. For example, Shopify has been a growth machine. And while Covid-19 acted as a short-term booster for even more impressive sales gains, e-commerce remains a secular trend that still has a long runway.

Global e-commerce sales estimated at $4.9 trillion in 2021 are forecast to balloon to more than $7 trillion in 2025. And SHOP saw revenues climb 57% last year in the face of vastly reduced pandemic-driven sales.

Today, Shopify is also just off its lowest price-to-sales ratio in three years. Lastly, analysts argue Shopify will still grow earnings at a compounded rate of 38% over the next five years.

Should You Buy Shopify Stock Today?

Source: Charts by TradingView

SHOP stock has the looks of an age old story that has played out in Amazon (NASDAQ:AMZN), Netflix (NASDAQ:NFLX) Tesla (NASDAQ:TSLA) and other multi-baggers.

During similar-looking brief retreats over the years, AMZN, NFLX and TSLA stock always appeared to be “still” outwardly expensive and flawed investments to the sky is falling crowd. Nothing of course could have been further from the truth.

Technically speaking, investors that wish to buy SHOP’s growth at a more attractive discount may want to wait until April comes on the board for price confirmation.

Currently, Shopify shares are forming a monthly doji off a band of volatile Fibonacci and trendline support as stochastics flattens in oversold territory.

Should a bullish crossover signal and SHOP stock continues to hold its pattern low, an actively managed collar strategy to take advantage of a bullish bias and Shopify’s price volatility makes sense.

On the date of publication, Chris Tyler did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.