CA - Shopify: A Sanity Check Is Overdue (Rating Downgrade)
2024-02-07 13:30:00 ET
Summary
- Shopify is heading into its fourth-quarter earnings release with significant optimism. However, I've not gleaned red flags indicating a need to cut exposure.
- The company's valuation is supported by its best-in-class growth grade. However, is it time to be more cautious and avoid chasing upward momentum?
- Shopify's focus on improving profitability and its strong execution track record suggests the worst is likely over.
- I explain why investors shouldn't simply throw caution to the wind, notwithstanding their conviction level in the company.
- It's time for me to return to the sidelines on this e-commerce platform leader.
Investors are likely heading into Shopify Inc.'s ( SHOP ) fourth-quarter earnings release with palpable optimism, given the substantial market outperformance since its October 2023 bottom. I alerted Shopify investors in my previous update in October, highlighting that I assessed robust support at SHOP's $50 level. As a result, I had confidence that "Shopify's strong growth potential and robust momentum suggest buyers are expected to defend its premium valuation."...
Shopify: A Sanity Check Is Overdue (Rating Downgrade)