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Shopify (SHOP) Stock Sinks As Market Gains: What You Should Know

Zacks Equity Research

In the latest trading session, Shopify (SHOP) closed at $393.07, marking a -0.97% move from the previous day. This move lagged the S&P 500's daily gain of 0.45%. Meanwhile, the Dow gained 0.49%, and the Nasdaq, a tech-heavy index, added 0.67%.

Prior to today's trading, shares of the cloud-based commerce company had gained 25.2% over the past month. This has outpaced the Computer and Technology sector's gain of 2.67% and the S&P 500's gain of 2.44% in that time.

Wall Street will be looking for positivity from SHOP as it approaches its next earnings report date. The company is expected to report EPS of $0.25, down 3.85% from the prior-year quarter. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $483.74 million, up 40.68% from the year-ago period.

Looking at the full year, our Zacks Consensus Estimates suggest analysts are expecting earnings of $0.20 per share and revenue of $1.56 billion. These totals would mark changes of -47.37% and +44.99%, 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. With this in mind, we can consider positive estimate revisions a sign of optimism about the company's business outlook.

Research indicates that these estimate revisions are directly correlated with near-term share price momentum. Investors can capitalize on this by using the Zacks Rank. This model considers these estimate changes and provides a simple, actionable rating system.

The Zacks Rank system ranges from #1 (Strong Buy) to #5 (Strong Sell). It has a remarkable, outside-audited track record of success, with #1 stocks delivering an average annual return of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 5.82% lower. SHOP is currently a Zacks Rank #3 (Hold).

Looking at its valuation, SHOP is holding a Forward P/E ratio of 1939.45. For comparison, its industry has an average Forward P/E of 31.77, which means SHOP is trading at a premium to the group.

It is also worth noting that SHOP currently has a PEG ratio of 77.58. 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. The Internet - Services was holding an average PEG ratio of 2.72 at yesterday's closing price.

The Internet - Services industry is part of the Computer and Technology sector. This group has a Zacks Industry Rank of 95, putting it in the top 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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