Keep an eye on Shopify (SHOP).
At the moment, the stock is getting crushed after Goldman Sachs’ analyst Gabriela Borges initiated coverage of the stock with a neutral rating.
While “she says the company is well-positioned long term, but she sees near-term headwinds. For one thing, Borges says that a recent slowing of gross-merchandise-value growth coming out of the pandemic isn’t likely to reverse for at least the next two to three quarters. And she says margins are likely to trend lower in 2022, as the company invests in strategic initiatives to grow its range of services,” as noted by Barron’s.
While the stock is currently oversold at triple bottom support, with over-extensions on RSI, MACD, and Williams’ %R, wait for confirmation of trend change before buying what appears to be overkill here. It’s better to wait for the weak hands to stop selling first.
Sure, Evercore ISI analyst Mark Mahaney just upgraded the stock to outperform with a $1,770 price target, but again we’d wait for selling pressure to fade.
Once it fades, it could be a solid buy for a few reasons, according to Mahaney.
For one, he argues SHOP is “one of the biggest structural winners” from the pandemic. Two, he says SHOP is “one of the highest quality” companies he covers, as noted by Barron’s.
In addition, “A third positive for the stock, Mahaney contends, is growth in new and emerging areas. Among other things, he cites the extension of the company’s Shop Pay platform to non-Shopify merchants, the growth of Shopify’s fulfillment network, and the expansion of the company’s point-of-sale software, installment payments, and other value-added services, like shipping and financing.”
While there’s a lot to like about SHOP, it’s not time to buy just yet. Wait for the weak hands to be shaken out, and be sure to wait for confirmation of trend change.
