Why This Shopify Analyst Believes Street Expectations May Be Too High
Portfolio Pulse from Priya Nigam
JMP Securities analyst Andrew Boone downgraded Shopify Inc (NYSE:SHOP) from Market Outperform to Market Perform, citing pressure on gross profit margins as GMV growth shifts towards enterprise. Boone also expressed skepticism about Shopify's ability to meet high subscription revenue growth expectations for 2025, potentially implying a price increase for Plus merchants. He noted that Shopify trades at a significant free cash flow multiple premium compared to peers like Workday Inc (NASDAQ:WDAY) and ServiceNow Inc (NYSE:NOW).
December 18, 2023 | 5:26 pm
News sentiment analysis
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POSITIVE IMPACT
ServiceNow Inc mentioned alongside Workday as a company with a lower free cash flow multiple than Shopify, potentially reflecting positively on NOW's valuation.
When an analyst points out that a company has a lower valuation multiple compared to a peer, it can lead to positive sentiment for the company with the lower multiple.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50
POSITIVE IMPACT
Workday Inc mentioned as a peer trading at a lower free cash flow multiple than Shopify, which could be perceived positively for WDAY in comparison.
Comparisons to peers with lower valuations can be favorable for those peers, as investors may see them as relatively undervalued.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50
NEGATIVE IMPACT
Shopify downgraded by JMP Securities due to margin pressures and doubts about subscription revenue growth, potentially affecting its stock price negatively in the short term.
Downgrades typically lead to negative investor sentiment in the short term, especially when they highlight fundamental concerns such as margin pressures and revenue growth challenges.
CONFIDENCE 90
IMPORTANCE 85
RELEVANCE 100