Canadian e-commerce company Shopify Inc. saw its average price target drop to the lowest level since January 20,21, after it indicated slower sales growth.
After the stock plummeted 17% in Toronto on Wednesday (its largest drop in history), more than 20 analysts cut their targets. This was in response to a company statement that revenue growth for the full year will be lower than 57% in 2021. The shares continued to slide Thursday, falling 11% to their lowest level since April 2020.
Shopify saw its business grow during the pandemic. In 2020, sales jumped 86% as more people went online. Shopify became Canada’s most valued company by market capitalization and overtook Royal Bank of Canada. In December, it lost that title due to a wider tech selloff and as customers returned to brick-and mortar stores.
Shopify announced last month that it had cancelled fulfillment-center and warehouse contracts. This sent shares to a 16-month low. Shopify has lost almost half of its market value this year, falling to C$100 billion ($79billion).
National Bank analyst Richard Tse stated in a note to clients that “the reality is that the above-mentioned ‘inline’ results, combined with no firm outlook guidance, was not enough.” If the above weren’t enough to give you cause to pause, there was another notable flaw in the SFN (fulfillment strategy) shift by National Bank to own or operate more fulfillment hubs.
Despite the fact that targets were smashed, analysts remain largely positive about the stock. Shopify currently has one sell rating with 27 buys, and 19 holds.
After reviewing the Q4 earnings report of Shopify, Wall Street analysts reacted with concern to Shopify (NYSE.SHOP) on Thursday.
Roth Capital Partners has lowered SHOP’s rating to Neutral from Buy.
Analyst Darren Aftahi says: “While international expansion and recalibrated investments seek to reduce further growth decelerations for FY22, they have a material effect on profitability. While key partnerships and point of sale could be mitigators in some cases, the recalibrated growth and tapering of growth leaves us with no choice but to stay on the sidelines.
Morgan Stanley SHOP: “A generally subpar Q4 print with slowing GMV growth, low subscriptions revenue, and lower than expected margins was compounded by opaque commentary on future growth and margins. We remain cautiously optimistic about the potential, but this lack of visibility has kept us off the frontlines.
Shopify has received price target reductions from Barclays (to $950 from $1200), Baird (1,650 from $11,650), Wedbush Securities (2,900 from 1,4400), DA Davidson (2,800 from $14,400), RBC Capital Markets (3,300 from 1,450), Citi (882 from $978)
Shopify shares fell 2.12% to $731.00 in premarket action after losing 16.04% on Wednesday. The 52-week trading range for Shopify is $720.00 to $1762.92.h