Shopify Stock Rose as UBS Predicted Its Strategy and Competition Would Affect the Top and Bottom Lines

Shopify Stock

Shopify Stock (NYSE:SHOP)

Shares of Shopify (NYSE:SHOP) fell during the first part of Thursday’s trading session, reaching a low of $36.56 per share. This came after UBS initiated coverage of the company with a Sell rating and set a price target of $30 for the Shopify stock.

As stated by analysts in a letter to investors, the long-term strategy of the firm and the competition are expected to influence both Shopify’s top and bottom lines. According to UBS, there is a potential threat to Shopify’s bottom line and its top line in the short future.

According to the analysts’ writing, Shopify is now “developing a retail ‘operating system’ and is the worldwide leader in eCommerce platforms internationally.”

They said that the following factors are the basis for the firm’s Sell rating:

According to its regression analysis and UBS’s expectations for personal consumption expenditures, the Street consensus estimates for GMV and revenue are not derisked for a recession in the first half of 2019.

According to recent polls, Shopify stock may face a severe threat to its top line in the long run from Amazon’s (NASDAQ:AMZN) Buy with Prime program.

In addition, the analysts pointed out that UBS’s comprehensive research into logistics hints that SHOP’s original guidance of $1 billion of CAPEX in 2023/24 is likely to remain the same. In the meanwhile, the fact that AMAZON operates its logistics at a loss has wider pockets given its wealth and greater take rate, and has traditionally considered the earnings of other firms as “its opportunity” might influence SHOP’s margins, which do not seem to be factored in the projections provided by the street, the analysts said.

“We anticipate a revenue growth rate of around 16% CAGR for 2021-2025E, which will result in $7.9B in contrast to the Street’s projection of $10.3B. Compared to the consensus estimate of $755 million, which represents 7.3% margins, our projection for EBITDA in 2025E is $222 million, which comes out to 2.8% margins, ” according to UBS.

Featured Image: Unsplash @ Roberto Cortese

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