Piper Sandler downgraded Shopify (NYSE:SHOP) shares from Neutral to Underweight, with analysts reducing the price target to $56 from the previous $58 per share.

The analysts highlighted Shopify’s significant outperformance this year, driven by its exit from the logistics business and a renewed focus on profitability. They acknowledged Shopify as a dominant force in the commerce platform sector, with over 2 million merchants and generating over $200 billion in Gross Merchandise Volume (GMV), alongside a top-line growth rate of more than 20%.

Despite these positives, the analysts raised concerns about Shopify’s current valuation, deeming it unsustainable. They believe that the growth and profit expectations currently reflected in the stock price are excessively optimistic. The decision to downgrade the rating is not influenced by macro factors, execution, or short-term demand. Instead, the analysts anticipate a moderation in Shopify’s fundamentals in 2024, as the company moves past events unique to 2023.

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