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Shopify (SHOP) Dips More Than Broader Markets: What You Should Know

Zacks Equity Research
Here at Zacks, our focus is on the proven Zacks Rank system, which emphasizes earnings estimates and estimate revisions to find great stocks. Nevertheless, we are always paying attention to the latest value, growth, and momentum trends to underscore strong picks.

Shopify (SHOP) closed at $202.17 in the latest trading session, marking a -1.75% move from the prior day. This move lagged the S&P 500's daily loss of 0.01%. Elsewhere, the Dow lost 0.1%, while the tech-heavy Nasdaq added 0.12%.

Prior to today's trading, shares of the cloud-based commerce company had gained 15.48% over the past month. This has outpaced the Computer and Technology sector's gain of 4.57% and the S&P 500's gain of 2.24% in that time.

Wall Street will be looking for positivity from SHOP as it approaches its next earnings report date. In that report, analysts expect SHOP to post earnings of -$0.04 per share. This would mark a year-over-year decline of 200%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $308.80 million, up 44.07% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $0.44 per share and revenue of $1.48 billion. These totals would mark changes of +15.79% and +37.85%, respectively, from last year.

It is also important to note the recent changes to analyst estimates for SHOP. Recent revisions tend to reflect the latest near-term business trends. As a result, we can interpret positive estimate revisions as a good sign for the company's business outlook.

Our research shows that these estimate changes are directly correlated with near-term stock prices. To benefit from this, we have developed the Zacks Rank, a proprietary model which takes these estimate changes into account and provides an actionable rating system.

The Zacks Rank system, which ranges from #1 (Strong Buy) to #5 (Strong Sell), has an impressive outside-audited track record of outperformance, with #1 stocks generating an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 5.81% lower. SHOP is currently sporting a Zacks Rank of #4 (Sell).

Digging into valuation, SHOP currently has a Forward P/E ratio of 469.08. Its industry sports an average Forward P/E of 25.08, so we one might conclude that SHOP is trading at a premium comparatively.

We can also see that SHOP currently has a PEG ratio of 19.82. This popular metric is similar to the widely-known P/E ratio, with the difference being that the PEG ratio also takes into account the company's expected earnings growth rate. Internet - Services stocks are, on average, holding a PEG ratio of 2.86 based on yesterday's closing prices.

The Internet - Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 160, putting it in the bottom 38% of all 250+ industries.

The Zacks Industry Rank includes is listed in order from best to worst in terms of the average Zacks Rank of the individual companies within each of these sectors. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1.

You can find more information on all of these metrics, and much more, on Zacks.com.


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