Shares of Shopify have been trending down since the start of the year while the rest of the market has rallied.However, there are several reasons to think the selloff is overdone, and a major rally is about to begin.). Indeed, while the broader market has been setting record highs since the final weeks of last year, shares of the e-commerce platform have been sinking some 40% from their high in February.
Shopify shares gapped down more than 15% the following day and only really looked likely to start bottoming out towards the end of last week. But was this a justified reaction? Sure, a contraction of that magnitude in gross margin is going to impact future profits, but as CEO Harley Finkelstein said, investors are “seeing the strongest version of Shopify in our history.
The price target reduction from Citigroup, which reiterated its Buy rating in the aftermath of the earnings report, was from $105 to only $95. That’s almost an upside of 60% from current levels, not to be sniffed at.Indeed, given that Shopify shares topped out at $90 back in February, that means that even with the refreshed price target, Citi is still expecting the company to trend back towards a high post-selloff in the coming weeks.
The fact that the bears have been unable to take the stock below here means momentum is starting to swing to the bulls. The longer the stock can stay above that level, the more likely it is to start testing the upside. We saw a hint of this on Friday when Shopify shares finished at their high of the day for the first time since April. It’s worth watching for more bullish momentum this week, as the upside potential is real and could be realized sooner than you think.
Source: News Formal (newsformal.com)
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