Shopify stock (NYSE: SHOP) gained about 10% over the past month and remains up by over 80% this year. This is well ahead of the Nasdaq-100, which remains up by 42%. There have been a couple of positive developments for the stock of late. For one, late last month, Shopify launched Amazon’s
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Interestingly, Shopify has had a Sharpe Ratio of 0.9 since early 2017, ahead of the 0.6 for the S&P 500 Index over the same period. This compares with the Sharpe of 1.3 for the Trefis Reinforced Value portfolio. Sharpe is a measure of return per unit of risk, and high-performance portfolios can provide the best of both worlds.
So, is Shopify stock a buy at current levels of about $63 per share? While Shopify valuation multiples are lower versus historical levels, with the stock trading at about 11x projected 2023 revenues, down from a range of 20x to 40x seen between 2019 and 2021, the multiple is still a bit high. That said, we think that Shopify’s revenue growth is still likely to remain above the industry average, as the company looks to expand beyond its core base of smaller customers to more large sellers and enterprises. Shopify is also looking to improve its margins further via cost cuts and manpower reductions. Shopify’s decision in early May to abandon a plan to build out a fulfillment business is also a big positive from a cash flow and risk perspective. We value Shopify stock at $70 per share, roughly 10% ahead of the current market price. See Shopify Valuation: Is SHOP Stock Expensive Or Cheap? for more details on Shopify’s valuation and Shopify Revenues for more details on the company’s revenue streams and how they are trending.
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