Shopify stock is overpriced and won't rise further analysts warn - Business Insider

Shopify's stock has exploded 140% in the last two months making it briefly the biggest company in Canada. Here is why analysts think it won't get any bigger.

5/23/2020 10:50:00 AM

Shopify's stock has exploded 140% in the last two months making it briefly the biggest company in Canada. Here is why analysts think it won't get any bigger.

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How economies will fare after reopeningKunal Chopra, chief executive of eTailz, pointed out that the start-up could lose steam if more retailers begin declaring bankruptcies. "A big driver is whether economy consumer spending may change when economies open up." 

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"There may be multiple bankruptcies, especially in the non-essential categories where that is going to [hurt Shopify].But Ygal Arounian, equity research analyst covering SHOP for Wedbush Securities, thinks potential bankruptcies would help Shopify.

"Our view is that we are not going back to the pre-COVID normal. You are already seeing significant changes in the retail landscape. You are seeing bankruptcies for major retailers' department stores."Arounian added: "It's a positive for e-commerce and Shopify. It's going to be a new normal and it's going to include a lot more online and omnichannel commerce. Shopify will help facilitate that for many SMEs."

But, Chopra said Amazon's long-established infrastructure means Shopify won't snatch a lot of market share in the long-term.Chopra said: "One advantage Amazon has it has one of the best operational infrastructures in the world. It has fulfillment by Amazon.  You don't get two-day Prime, one-day Prime, on Shopify unless you as a merchant can support that."

"The other perspective is that that is where consumers are. One of the issues is that Shopify has to direct traffic to its site brand, it has to build that brand presence."Though he pointed out, Shopify allows the merchant to own the customer relationship where Amazon doesn't. 

He added: "E-commerce here is to stay and they are both going to compete for market share, you will see a good balance between D2C and market places in the future," but for now, our "short-term indication is a hold, long-term indication it is a buy."

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