SHOP - Shopify Q1 Preview: This Wall Street Darling Is Still Dead Money
2024-05-06 06:15:20 ET
Summary
- On the back of a ~10% price decline, Shopify's long-term risk/reward has improved slightly over the last three months.
- SHOP stock appears to be priced for perfection (and more) going into its Q1 2024 report on Wednesday, May 8th, 2024.
- In today's note, we shall preview Shopify's Q1 2024 report, and formulate an informed decision on the stock based on fundamental, quantitative, technical, and valuation analysis.
Introduction
In light of its Q4 2023 report, I downgraded Shopify Inc. ( SHOP ) to a "Sell" rating based on its weakening business outlook, exorbitant valuation, and unattractive long-term risk/reward:
Shopify Q1 Preview: This Wall Street Darling Is Still Dead Money
Based on today's analysis, I continue to adore Shopify as a business. In my view, Shopify's profitable growth story is just getting started. At TQI, we now own a 2.43% position in SHOP within our Moonshot growth strategy. However, with Shopify's growth set to decelerate in 2024 and margins projected to come under pressure in upcoming quarters, I fail to find a good reason for paying up a +100% premium for Shopify (potentially headed into an economic slowdown, i.e., consumer spending slump).
On the back of a +35% jump in SHOP stock since my last assessment, Shopify's long-term risk/reward has deteriorated significantly with its 5-year expected CAGR falling down to -0.2% . Considering this reality, we will be trimming down our "SHOP" position at my investing over upcoming weeks, and as such, I am downgrading Shopify to a "Sell" in the $80s .
Source: Shopify: A Fantastic Business At An Extravagant Price Tag