Shares of Canadia’s Shopify Slump After It Warns of Revenue Slowdown

Shares of Canadian e-commerce Shopify fell over 18% on Wednesday after the company warned that revenue growth is expected to slow in the first half due to the cooling of the e-commerce boom witnessed during the pandemic.

The e-commerce software company reported quarterly adjusted earnings of $1.36​​ per share, beating the Wall Street consensus estimates of $1.24 per share. The company said its revenue jumped more than 40% to $1.38 billion from a year earlier. That too beat the market expectations of $1.33 billion.

“While we believe that the COVID-triggered acceleration of e-commerce that spilled into the first half of 2021 in the form of lockdowns and government stimulus will be absent from 2022, and there is caution around inflation and consumer spend near term, for the full year, we see economic growth supporting the continued penetration of retail by e-commerce,” the company said in the press release.

The company anticipates revenue growth for the full year 2022 that is lower than the 57% revenue growth achieved in 2021.

The U.S. listed Shopify stock slumped over 18% to $731.54 on Wednesday. The stock fell over 46% so far this year after surging over 21 in 2021.

Analyst Comments

“We see Shopify continuing to expand and capitalizing on the attractive eCommerce tailwinds, and highlight a $25B+ ‘serviceable’ opportunity for the company driven by international expansion, continued Payments penetration, and growth within Shopify Fulfillment Network,” noted Keith Weiss, Equity Analyst at Morgan Stanley.

“A key beneficiary of the pandemic-driven shift to e-commerce, investor debate now shifts to the durability of GMV growth and levers to expand take rate. With an expanding solution portfolio and recent pullback, SHOP looks attractive, but the lack of metrics makes conviction difficult.”

Shopify Stock Price Forecast

Twenty-three analysts who offered stock ratings for Shopify in the last three months forecast the average price in 12 months of $1,403.58 with a high forecast of $2,000.00 and a low forecast of $900.00.

The average price target represents a 92.80% change from the last price of $728.00. Of those 23 analysts, 13 rated “Buy”, 10 rated “Hold”, while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $1,150 with a high of $2,500 under a bull scenario and $500 under the worst-case scenario. The investment bank gave an “Equal-weight” rating on the e-commerce company’s stock.

Several analysts have also updated their stock outlook. CIBC cut the target price to $950 from $1750. Citigroup lowered the price target to $978 from $1570. RBC slashed the price objective to $1450 from $1800.

Technical analysis suggests it is good to sell as 100-day Moving Average and 100-200-day MACD Oscillator shows a strong selling opportunity.

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