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Shopify Stock Forecast: Why Shopify Has Bloated Valuation

The article was written by Motek Moyen Research Seeking Alpha’s #1 Writer on Long Ideas and #2 in Technology – Senior Analyst at I Know First.

There’s an ongoing global pandemic and yet Shopify touts a YTD price return of 86.77%. This is in spite of Shopify’s continuing net losses.
The rapid ascent of SHOP this year has given it bloated valuation ratios. This goes to show that investors strongly believe in the momentum growth potential of Shopify.
Shopify now touts a TTM Price/Valuation ratio of 49.21. This is much higher than Adobe’s 16.31. Adobe is the parent firm of Shopify’s rival, Magento.
The super optimism over SHOP is due to its outstanding 5-year revenue CAGR of 69.48%. Profitability will eventually come to Shopify once it reaches peak maturity.
Shopify has a healthy balance sheet. Its total cash is $2.36 billion and has no debt. Shopify can therefore a few more quarters of negative levered free cash flow.

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This article was written by Michael Shpits, a Financial Analyst at I Know First.

Shopify stock saw strong growth from coronavirus lockdowns increasing ecommerce traffic amid decreased brick-and-mortar retail sales.
Global retail trends see vast increase in ecommerce sales to the detriment of traditional retail locations both prior to and during the coronavirus pandemic.
New tools for merchants including business accounts and debit cards are poised to strengthen Shopify’s market capture.
Partnership with Facebook in launching Facebook Shops in position to capitalize on growing online retail trends and Facebook’s resilient growth despite recent revenue issues.
Partnership with CoinPayments in bringing crypto payment platform to Shopify merchants set to make crypto payment options easier and more affordable.