Shopify Inc (TSX:SH., NYSE:SHOP) shares took a hit on Wednesday morning after Wedbush analysts lowered its rating to Underperform on the Canadian eCommerce stock.
Analysts came away from Shopify’s Investor Day with a bearish view on the stock, citing “limited room for further multiple expansion.”
“While we continue to hold a favorable view of Shopify's overall strategy and competitive positioning within eCommerce, shares have risen +53% since the company reported 3Q23 results on November 2nd and now trade at a significant premium relative to software peers across key valuation metrics,” Wedbush analysts wrote in a note.
Wedbush analysts were zeroed in on the company's long-term strategy, competitive positioning, and potential growth drivers at Investor Day. Despite increased confidence in Shopify's market share expansion, they found no significant changes to the long-term Total Addressable Market (TAM) and monetization outlook.
Shopify's stock is trading at a premium compared to peers, especially in terms of valuation metrics, Wedbush noted.
The revised target price of $68 reflects concerns about the current valuation.
While the outlook for Shopify remains positive, the analysts recommend exploring other eCommerce opportunities for potential upside, particularly Amazon (AMZN, Outperform) and MercadoLibre (MELI, Outperform).
Both US-listed and Canadian-listed shares of Shopify were down 2.7% by midmorning.