Short Trade Idea
Enter your short position between $115.04 (an intermediate horizontal support level) and $122.69 (the intra-day low of its last bullish candlestick).
Market Index Analysis
- Shopify (SHOP) is a member of the NASDAQ 100 Index.
- This index trades in a bearish chart pattern with rising downside catalysts.
- The Bull Bear Power Indicator of the NASDAQ 100 is bearish and below its descending trendline.
Market Sentiment Analysis
Equity futures are moving higher after January’s NFP report came in much stronger than expected. The focus is now back on the Fed, where views on how many interest rate increases are ahead differ. Still, annual revisions could show over 600,000 jobs fewer than previously reported. Friday’s CPI report will provide the next inflation snapshot. Cisco tumbled in after-hours action following the release of its earnings report, while McDonald’s also slipped. Earnings from Applied Materials and Coinbase could move markets today. Oil prices are rising amid heightened US-Iranian tensions, which may keep markets on edge.
Shopify Fundamental Analysis
Shopify is a leading e-commerce platform with nearly 60% of its business in the US. It is known as the go-to e-commerce platform for startups due to its fair fee structure and user-friendly platform.
So, why am I bearish on SHOP following its earnings miss?
While Shopify beat expectations on revenues, reporting $3.672 billion versus estimates of $3.664 billion, it missed on earnings per share, reporting $0.46 versus estimates for $0.52. I remain bullish about its excessive valuations and the impact of AI on its business. Despite expanding revenues, costs are rising, and management problems increase net earnings. I am also concerned by its ongoing margin contraction over the past six years. Competition from BigCommerce, Wix, and Amazon is another bearish catalyst and revenue killer.
Metric | Value | Verdict |
P/E Ratio | 86.65 | Bearish |
P/B Ratio | 12.38 | Bearish |
PEG Ratio | 1.12 | Bullish |
Current Ratio | 5.96 | Bullish |
ROIC-WACC Ratio | Positive | Bullish |
The price-to-earning (P/E) ratio of 123.86 makes SHOP an expensive stock. By comparison, the P/E ratio for the NASDAQ 100 is 33.78.
The average analyst price target for SHOP is $172.80. While this suggests good upside potential, downside risks are greater.
Shopify Technical Analysis
Today’s SHOP Signal
- The SHOP D1 chart shows price action inside a bearish price channel.
- It also shows price action between its descending 0.0% and 38.2% Fibonacci Retracement Fan levels.
- The Bull Bear Power Indicator is bearish and below its descending trendline.
- The average bearish trading volumes are higher than the average bullish trading volumes.
- SHOP corrected as the S&P 500 Index hovers near all-time highs, a bearish confirmation.
My SHOP Short Stock Trade
- SHOP Entry Level: Between $115.04 and $122.69
- SHOP Take Profit: Between $69.84 and $74.67
- SHOP Stop Loss: Between $136.62 and $144.14
- Risk/Reward Ratio: 2.10
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