Top Catalysts Working For Shopify Stock
InvestorPlace - Stock Market News, Stock Advice & Trading TipsShopify may not be at its best today but it has the potential to reach there. Buy SHOP stock while...
Shopify (NYSE:SHOP) has a solid growth story and one that attracts admiration from across the world. The company has successfully survived the pandemic. It is also the closest service one can get to Amazon (NASDAQ:AMZN). SHOP stock went from the pandemic low of $1,040 in March 2021 to a whopping high at $1,762 by November 2021. However, it could not sustain the highs and started to dip. It is down 22% for the month and went from $1,131 on Jan. 10 to around $810 in Feb. It is trading at $857 today.
Despite being down more than 40% in the past six months, SHOP stock is not the one to write off. The online shopping boom has led to a solid rivalry between Shopify and Amazon. While both the companies are fighting for users and a higher market share, Shopify is also making the right moves by expanding across different fronts through partnerships. This will help the company in the long term and could boost revenue and profit. It will push SHOP stock higher from the current level.
Let us look at the catalysts working for Shopify.
Solid Partnerships Will Help With Revenue
Shopify has received the patent for body-measuring technology as it delves deeper into digital sizing. The technology can help users find their clothing sizes through sensors and augmented reality. It will help Shopify compete with its rival Amazon. The company filed a patent in November 2019. This patent will help the company attract and retain customers.
Shopify has been known for investing in augmented reality (AR) and virtual reality (VR) in the past, as well. It also partnered with Poplar Studio in the past to launch 3D and AR visualizations for the products on its site.
Shopify has also formed a partnership with Coinbase (NASDAQ:COIN) and it will support crypto transactions on its platforms. Shopify Chief Executive Officer Tobias Lutke has joined the Board of Directors at Coinbase Global. The news led to a rise in SHOP stock and it will be interesting to see how this partnership works out in the near term.
The company has also joined up with JD.com, Inc. (NASDAQ:JD) to cater to the Chinese market. Through this partnership, Shopify will be able to strengthen its position in the global market. It will allow Shopify merchants to sell on JD Worldwide and get access to 550 million customers in China. This partnership could be huge for the company.
Shopify will announce its fourth-quarter results on Feb. 16 and will give a better perspective to investors about the future of the company. It expects the fourth-quarter revenue to contribute the largest share of the full-year revenue. However, the supply chain issues may disrupt the company's growth projections. In the third quarter, the total revenue stood at $1,123 million. I believe the company will report a higher growth in merchant solutions revenue as compared to the third quarter.
The Bottom Line on SHOP Stock
Analysts have lowered the price target on SHOP stock, but there is still a chance to generate returns if you buy at the current level. Keith Weiss, a Morgan Stanley analyst has a price target of $1,150 with an Equal Weight rating. Further, Paul Treiber, RBC Capital analyst has a price target of $1,450 with an Outperform rating ahead of the quarterly results.
SHOP stock has seen a steep decline lately, but that does not write off the potential of the company. With solid partnerships and a strong user base, the company will report solid quarterly earnings and this will take SHOP stock higher.
It has massive growth potential in the Chinese market but execution will be the key. If the company manages to execute well, we will see it reflect on the bottom line. However, the company will need some time to get back to the highs it was once trading at.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Vandita Jadeja is a CPA and a freelance financial copywriter who loves to read and write about stocks. She believes in buying and holding for long-term gains. Her knowledge of words and numbers helps her write clear stock analysis.
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