Is Shopify stock a buy now?
Shopify is an e-commerce platform that lets other businesses easily sell things online. Shopify is also viewed as a merchant-friendly alternative to e-commerce behemoth Amazon. Shopify aims to capture both big and small merchants and enable them to reach as many clients as possible. Some investors have gotten nervous about Shopify in recent months. The e-commerce platform was a big winner during the pandemic but has seen its stock price fall 43% so far in 2022. But even with its huge 2022 declines, it’s provided early investors with gains of more than 2,000% of all time. If you have a long-term time horizon, sell-offs like these can provide buying opportunities.
Why is Shopify stock so high?
Shopify trades in the $780 per share range as of the time of this writing. This represents an increase of nearly 4,600% since it debuted in 2015. Since then, Shopify's annual revenue has grown at a rapid pace, greatly outpacing technology giants like Alphabet over the same time frame. How has Shopify been able to grow so quickly?
Shopify's business model is to offer subscriptions for businesses and individuals to easily create a website and start selling things online. It also has an application marketplace, where other businesses can offer services to its e-commerce merchants, and it has its own payments service called Shopify Payments. However, the most important advantage may lie in the Shopify Fulfillment Network (SFN). Because of the SFN, not only can Shopify host an e-commerce platform, but it can pack, ship, brand, and manage orders and inventory for clients. This places Shopify in an advantageous position over its peers that merely sell software as a service.
Shopify has become the de facto online retail operating system for millions of businesses across 175 countries. It has about 1.5 million merchants and an estimated market opportunity of $20 trillion globally. Astute investors know this, and they're bidding up its stock price to reflect the recent trends that are likely to drive more retail sales to online channels.
Is Shopify stock overvalued?
Shopify business has strong growth potential as it has huge total addressable market opportunity. The management is actively expanding the service base via new co-operations. Our historic and relative valuation analyses indicate that the stock is overvalued.
Based on those expectations and its current price of $660 per share, Shopify trades at 15 times its 2022 sales. And Shopify's current P/E ratio stands at about 34, slightly above its industry peers’ ratio of 32.1x. Oracle trades at just 5 times sales. Salesforce.com goes for around 7 times sales. The nearest peer is BigCommerce is valued at 6 times sales.
Will Shopify stock continue to grow?
If you bought SHOP stock early, you’re likely still pretty happy with the returns, even as Shopify faltered in the last few months. With the continued expansion of its enterprise partnership network and the addition of new large-cap companies to its large customer base, investors should remain confident in Shopify stock over the long term.
If you buy Shopify today, you’d be paying a relatively reasonable price for it. Keep in-mind that a P/E of 33x implies a lot of future growth.
What is the prediction for Shopify stock?
Shopify stock is down by about 48% off all-time highs seen in early November, trading at levels of around $780 currently. Does that painful pullback represent a good buying opportunity for investors who missed its previous rally? The 27 analysts offering 12-month price forecasts for Shopify Inc have a median target of $988.63, with a high estimate of $1,500.00 and a low estimate of $800.00. The median estimate represents a +26.75% increase from the last price of 659.00.
Shopify continues to grow at a brisk pace, and the adoption of online retail is a story that will play out over the long term. Investors need to remain patient and accumulate Shopify shares at every major dip.
Who is the competitor of Shopify?
Shopify has to fend off stiff competition from website builders, cloud-based enterprise solutions, eCommerce systems, and marketplaces like Amazon. Amazon is a worthy top Shopify competitor with more than 8 million sellers. Shopify was in second place with more than 1 million eCommerce merchants on its platform.
According to Statista, Shopify was run on 20 percent of e-commerce sites worldwide in 2021. Shopify’s top competitors in the market include WooCommerce, Wix, and SquareSpace, with at least 10% of the market each. And dozens of other companies compete with Shopify, including BigCommerce, Ecwid, OpenCart, and more. Here are the most similar stocks as Shopify with a buy recommendation are based on Triangle Finance:
Amazon.com, Inc. (NASDAQ: AMZN)
Etsy, Inc. (NASDAQ: ETSY)
BigCommerce Holdings, Inc. (NASDAQ: BIGC)
Wix.com Ltd. (NASDAQ: WIX)
Squarespace Inc (NYSE: SQSP)
Block, Inc. (NYSE: SQ)
GoDaddy Inc. (NYSE: GDDY)
Final thought
Investors should think twice about buying this tech stock at current levels. Given current market conditions, Shopify's shares could drop even lower in the near term. But in the long run, Shopify's shareholders who stick with the company through this period will be rewarded. That’s why this stock is an excellent tech stock to buy and hold for a long time.
