Shopify Inc. provides a cloud-based multi-channel commerce platform for small and medium-sized businesses. But don’t get it twisted, their customers also include customers such as Johnson & Johnson, Unilever and the Obama Foundation.
Shopify’s platform provides merchants with a single view of business and customers in various sales channels, including Web and mobile storefronts, physical retail locations, social media storefronts, and marketplaces; and enables to manage products and inventory, process orders and payments, ship orders, build customer relationships, leverage analytics and reporting, and access financing.
A couple of months ago, Facebook announced Facebook Shops which lets businesses operate online stores on Facebook and Instagram. Soon after the announcement, Shopify announced their partnership with Facebook, which will manage merchants’ products, inventory, orders, and fulfillment directly from within Shopify.
Two weeks ago, Walmart+ was launched, the $98 annual membership which includes unlimited same-day delivery of groceries and other goods from Walmart Supercenters, reserved delivery slots and open-slot notifications, as well as some access to Walmart’s new Express two-hour delivery offering. However, the backbone of Walmart+ is once again, Shopify.
As you can imagine, the stock price has been like wildfire this year.
The core conundrum for Shopify investors is simply this: the business is hot, but the stock is even hotter.
Shopify shares have rallied 40% since reporting financial results on May 6, and the stock has been even higher. But even bulls on the company’s fundamentals have become a little concerned about valuation, with the stock trading at about 1,900 times projected 2020 profits and about 54 times current year sales estimates.
Roth Capital analyst Darren Aftahi on Tuesday raised his estimates on Shopify for both 2020 and 2021, citing “strong underlying growth” from surveyed customers. For 2020, he now sees revenue of $2.18 billion, up from $2.04 billion; for 2021, he now sees $2.90 billion, up from $2.63 billion.
But the analyst maintains his Neutral rating on the shares, though, and his upwardly revised price target is $800, up from $750, but still well the recent stock price.
Based on the downgrades, the stock has pulled back and touch the daily demand a couple of time. But because the zone has not been deeply penetrated, the zone could still work.
However, with earnings coming up on July 29, it's anyone's guess where price is headed next. So my play or potential play is if the stock sells off on news, I will look to put on a bull put trade below the 2nd daily demand level at $800.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.