27% profit every 20 days?
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Shares of Shopify Inc (NYSE:SHOP) have gained more than 45 percent since the start of 2019 and the stock's valuation implies limited upside potential ahead, according to Guggenheim Partners.
The Analyst
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Guggenheim's Ken Wong downgraded Shopify from Buy to Neutral while removing a $285 price target.
The Thesis
Shopify's status as a "disruptive force" within the retail vertical space remains unchanged but the stock's valuation is stretched, Wong said in a note. The research firm updated its customer cohort analyst to better predict future revenue bullish investors are likely modeling. Under an optimistic analysis, including a compounded annual growth rate of "New" cohorts of 15 percent, fiscal 2020 revenue would come in at around $2.4 billion versus the consensus estimate of $2.009 billion.
If Shopify matches the bullish outlook the stock's valuation at 14 times next-12 months EV/Sales remains a "reasonable upper threshold," the analyst wrote in the note.
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There are three scenarios where notable upside in the stock would be justified. These include:
- Acceleration in momentum at Shopify Plus could result in a "more aggressive pace of competitive displacement" versus current expectations;
- Shopify could expand into adjacent e-commerce markets including digital marketing and sales automation to "complete the commerce loop;" and
- Management could issue bullish guidance during its June user conference, including a long-term margin target north of 20 percent.
Price Action
Shares of Shopify were trading lower by 3.4 percent at $250.04 Monday morning.
Related Links:
Shopify Analyst Tackles 3 Investor Questions In Bullish Initiation
Wall Street Weighs In On Shopify's Q4 Earnings
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.