Q: If I'm correct, 5i likes SHOP and has been suggesting it's a top growth prospect. Can you explain what's happening with the stock since it released earnings. It beat estimates and provided what I thought was a good future picture. But the stock has been dropping. 5i has said if you liked the stock before earnings release, you should like it much more now. It seems analysts see something negative as most have been maintaining a 'hold' rating or moving to sell. I don't see any upgrades but maybe I missed them. Also, insiders have been net sellers of late. Can you provide an assessment of things? Stock has had a very good ride so far this year. What price do you see as level of support? How low might it go? Is it still a top growth pick? thanks
SHOP is now trading at 11.7x times' Price/Sales (historical averages range from 9x to as high as 45x). In the 2Q, SHOP’s revenue grew 31% to 1.69B$, beating estimates of $1.62B and EPS was $0.14 beating estimates of $0.05. The balance sheet is strong, with net cash of $3.7B. Operating results are strong across segments, the full-year outlook is also okay.
We remain bullish on SHOP, and maintain our view that SHOP is one of our top growth name, we think this is a solid quarter. Expectations may just have gone too far too fast for the name. Although insiders have been net sellers of shares over the years, the majority of management teams still hold a significant stake in the business. We think the incentives are still strongly aligned here. We can’t time the bottom on how much lower can it go, we are okay to average some into the position here and over time. There are 19 BUYS on the stock, 27 HOLDs and 3 SELLs. Barclays, RBC, Bank of America, DA Davidson and Piper Sandler and Citigroup all raised target prices after the results. It has been a tough market for tech of late but the stock is (still) up 58% this year, and if inflation/rates peak we still expect it to do well over a longer period.