Shopify Stock Gets Price Target Cut, but Don’t Miss Buying Opportunity

SHOP stock - Shopify Stock Gets Price Target Cut, but Don’t Miss Buying Opportunity

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Canada-based e-commerce platform provider Shopify (NYSE:SHOP) is definitely not a darling on Wall Street right now. Once known as a great growth stock, SHOP stock is now a deep value play that contrarian investors ought to consider.

It’s funny, how analysts will sometimes criticize a stock after it has already lost a great deal of value. If you heed the advice of these “lagging indicator” analysts, you might end up selling stocks at the worst possible time.

This isn’t to suggest that bearish analysts don’t make valid points. For example, Piper Sandler analyst Brent Bracelin recently brought up some of Shopify’s “increasing execution risks,” which are absolutely worth noting.

These risks, evidently, are “tied to 1) inflationary pressure on consumer spending, 2) a shift in consumer behavior that favors services over consumer goods, 3) tough comparisons vs. stimulus aided tailwinds one year ago, and 4) an economically sensitive model with GMV driving approximately 70% of sales.” Fair enough.

Furthermore, Shopify is undoubtedly taking a financial hit due to rising inflation, the cessation of stimulus checks and so on. However, it isn’t unreasonable to assume that these issues have already been factored into the SHOP stock price.

Consider this: Shopify shares declined from a high of $1,762.92 in November 2021, to now being around $460. We’re talking about a nearly 75% drop in share price here.

So, just maybe, Bracelin is overreacting by slashing his price target on SHOP stock from $800 to $100. If the stock actually fell to $100, that would represent a 94% decline from the 52-week high, which seems unlikely to happen.

Besides, it’s not as if Shopify has ceased generating revenue. Notably, Bracelin reduced his first-quarter 2022 revenue estimate for Shopify by a mere 1.4%, to a still-impressive $5.84 billion.

Plus, Shopify could have a significant revenue stream coming due to a potential acquisition. Specifically, Shopify is reportedly in talks to buy fast-delivery specialist Deliverr.

Moreover, Shopify now has a trailing 12-month price-earnings  (P/E) ratio of around 20. In turn, this should definitely pique the interest of value-conscious investors.

Overall, prospective investors should take note of Bracelin’s points but still consider buying SHOP stock. In fact, don’t be surprised if Shopify shares rebound soon, instead of hitting Bracelin’s $100 target.

On the date of publication, David Moadel 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.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


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