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Shopify (TSE:SHOP) Down 66% This Year; Is there Reason to Fear?

Cloud-based e-commerce platform provider Shopify (TSE:SHOP) (NYSE:SHOP) was not spared from the headwinds that rocked the broader industry this year. Shares of Shopify are down around 66% this year, leading the Canadian stock market to be on track to end the year lower than it began. However, fear not – this might be a great opportunity to accumulate shares of the downtrodden stock.

Shopify’s sell-off began in November last year, mostly as a result of events beyond Shopify’s control. Software stock valuations had gotten too high and would inevitably snap. Moreover, the first year of the pandemic boosted the growth of e-commerce businesses manifold as a result of lockdowns and social distancing rules.

Once economies started to normalize across the globe, the watershed began to subside, resulting in tough comparisons. However, investors are highly driven by emotion and began selling off Shopify shares as soon as the difficult comparisons started to reflect in the company’s quarterly financials.

Yet, Shopify is still the go-to e-commerce platform for small and medium-sized businesses and is even a significant threat to the market share of e-commerce giant Amazon (NASDAQ:AMZN). The decline could be a great buying opportunity for long-term gains, as the shares seem to be oversold at the current price.

Recently, SMBC Nikko analyst Andrew Bauch reiterated a Buy rating on SHOP stock and raised the price target to $45 from $40, saying that the stock has the potential to pull up sales and margin simultaneously in 2023. He is particularly upbeat about the evolution of Shopify’s Payment strategy and believes it to be one of the best emerging opportunities for the company to thrive.

Is Shopify a Buy, Sell, or Hold?

Shopify has a Moderate Buy consensus rating on Wall Street, with an average price target of C$55.89.

Bottom-Line

A solid business model, popularity with SMBs, and upbeat demand trends strongly indicate that a recovery in shares may be on the horizon. When the macroeconomic backdrop improves, Shopify stands to be one of the biggest beneficiaries of the spike in demand. All these arguments create a strong bull case for Shopify.

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Chandrima Sanyal
Chandrima holds a Master's degree in Economics from the University of Calcutta. She started her professional journey with Amazon followed by a brief stint as a data analyst at a private family office in Kolkata, India. After taking a 2-year career break to focus on family, she restarted her career in equity research and financial media at Zacks Investment Research, where she worked for three years before joining TipRanks in 2021. Chandrima majorly covers the technology industry in her articles, which reflect a combination of deep knowledge of economics and impeccable writing skills. Her favorite stocks to cover are cybersecurity and semiconductor stocks listed on the NASDAQ and NYSE. However, she loves taking up challenging writing assignments that require deep cross-sector research. Previously, Chandrima had been a part of a project for which she wrote personal finance articles for her former employer, Zacks. This apart, writing industry outlook reports on several industries within the technology sector, regular updates on the cybersecurity and semiconductor industry, and initiating reports on technology stocks listed on the U.S. stock exchanges were a part of her experience. Her articles for TipRanks are also regularly published on partner websites like Nasdaq, CNBC, the Haaretz newspaper, and many more.