Why Shopify Stock Is Making New Lows


  • A continued unwinding out of growth and valuation stocks weigh on Shopify (SHOP) shares.
  • The analyst community is another Achilles Heel for SHOP stock.
  • Only shop the price drop in SHOP with this strategy.
Image of a shopping cart toy on a wooden desk carrying a mobile phone that features the Shopy (SHOP) logo on it
Source: justplay1412 / Shutterstock.com

E-commerce platform Shopify (NYSE:SHOP) is offering more tempting prices for investors in search of a good deal. Shares are down 7.50% this week and hitting stock levels last seen in May 2020. But unless you like being miserable with plenty of company, SHOP stock is no bargain.

If the usual headline threats of inflation and rising interest rates, consumers at risk, Covid-19 and Russia weren’t enough, now even other problems are hanging over shares of SHOP. While Shopify isn’t set to report until mid-May, Netflix’s (NASDAQ:NFLX) dreadful report helped spark a sell-off in SHOP stock Wednesday on the grounds, growth stocks at large, are at risk.

And the sellers, rather than the shoppers in SHOP stock may in fact be on the right side of transaction. Today let’s examine what else is happening to Shopify, both off and on the price chart, and why a cheaper share price isn’t the same thing as value.

SHOP Shopify $482.10

Bears Warn It’s Not Just a Netflix Story

As much as NFLX’s fallout has rattled a higher multiple growth stock like SHOP, it’s far from the first shot over the bow for Shopify. Shares of course have taken it on the chin the past six months in sympathy with a broader push out of growth stocks and whose valuations can suffer more easily in a rising interest rate environment like today’s.

But SHOP stock’s swifter falling out with investors which helped sink shares in excess of 70% from their November all-time-high of $1762.92 also has all but gone, benefits of Covid-related lockdowns and restrictions weighing on shares. Not that Netflix isn’t similar in that respect, but they’re not exactly two peas in a pod.

Bears may also be looking at Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) recent launch of its Last Mile Fleet Solution. The service is layered on top of its On-demand Rides & Deliveries solution on Google Maps and it’s a potential threat to SHOP stock’s small-to-mid-sized retail customers within its Shopify Fulfillment Network.

Also and other than relative cheapness, there’s little value buying a stock that’s out-of-favor with momentum investors and whose still-lofty price multiples keep it in the company of Snowflake (NYSE:SNOW) rather than IBM (NYSE:IBM), and removed from the clutches of more fragile investors.

More Bearish Sightings in SHOP Stock

Shopify (SHOP) broken doji, trendline and Fibonacci support warn of Covid bottom retest in SHOP stock
Click to Enlarge
Source: Charts by TradingView

Bears can also argue that Wall Street’s overly-bullish analyst community is another drag in-the-making on SHOP stock.

Investors might view Shopify’s median price target of $882, high estimate of $1,500 and low forecast of $660 compared to today’s SHOP stock price of around $480 as three good, better and stellar reasons to stay the course.

More likely, the vote of confidence is a red herring not unlike a hefty dividend trap that lures in unsuspecting value-minded investors thinking they’ve landed themselves a free lunch. That’s not all though. SHOP stock’s price chart is also warning investors not to take a bite.

Technically, and as the monthly price chart reveals, this week’s decline has shares breaking below March’s bullishly-placed and oversold monthly doji candlestick, as well as trendline support following key Fibonacci failures. That’s not a good sign.

The fact the incredibly determined bearish price action has also occurred in the face of a pending stock split, and not without its share of cheerleaders, is another warning in today’s SHOP stock.

Smarter Shopping in SHOP Stock

If you haven’t guessed, staying on the sidelines looks very appropriate right now in SHOP stock. Shopify shares are stuck in a risk-averse market environment that’s not going to satisfy bullish momentum investors or worthy of a rescue by value-types.

The good news and longer-term, as Shopify makes its way lower, the chance for a solid return on investment and who knows, even another ten-bagger, increases. For now and the way stocks of SHOP’s caliber are trading, it’s better to be late than early though.

In my estimation, a full-blown challenge of Shopify’s pandemic bear market low in March 2020 is increasingly possible. But if that seems alarmist, I’d at least warn bulls fighting a vicious trend to seek protection with an actively-managed collar on SHOP stock and so you can continue to shop for better value later.

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.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

Article printed from InvestorPlace Media, https://investorplace.com/2022/04/why-shopify-stock-is-making-new-lows/.

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