Shopify Inc.'s biggest drop of 2019 shows that the e-commerce store is testing the boundaries of what investors are willing to pay for rapid sales growth.
The shares fell 8.9% in New York on Tuesday, their biggest fall since December 14, after more than doubling from the beginning of the year. This start-up created more than $ 25 billion in market value, as investors looked over the rising competition and focused on fast-growing sales and new online cash products. The money-losing company shares are now traded at approximately 21 times estimated sales, more expensive of that measure than any technology stock in the S & P 500 Index.
That makes Wall Street squeamish. At least five analysts have downgraded the company over the past two months. In almost all cases, the high stock price was the biggest concern.
"We now see more limited upside to stocks over the next 1
What began as co-founder and CEO Tobi Lutke's effort to sell snowboards on the internet has grown into a company that is expected to generate more than $ 1.5 billion in revenue in 2019. In addition to online sales, Shopify is now competing with companies such as Square Inc at the point of sale in mortar. Last week, the Ottawa-based Shopify said it plans to spend $ 1 billion on a chain of fulfillment centers that would throw it even more directly against Amazon.com Inc.
Shopyy's expansion into the neck has come at the expense of profitability. The company has not made an annual profit on a GAAP basis and is not expected until 2020, according to analyst estimates.
Although investors have surely been drawn to Shopify for their sales growth, which is expected to exceed 40% this year, they also price their implementation. The company has not missed sales estimates in the 16 quarters that it has reported financial results as a publicly listed company.
"The reason I think the shares have done so well irrespective of the real strong and favorable environment for software warehouses is that it has lived up to its promise and then some," says Tom Forte, a DA Davidson analyst, in an interview. "They now have a long history of implementation and are sharp in terms of capital allocation."
Forte is still bullish on Shopify and says that increased US regulatory control of Amazon and other technical giants can create additional opportunities for Shopify, which makes fulfillment center push critical.
Despite recent downgrades, most analysts remain optimistic, with Shopiff's US stock-traded stock having 15 buy ratings, 11 holdings and two selling, according to data compiled by Bloomberg. offer of $ 17 per share
Bearish bets have fallen to the lowest level in m is than one year, according to IHS Markit data. Shares lent to short sellers account for only 2.1% of the float, from a maximum of almost 10% in October.
Gerber Kawasaki Wealth & Investment Management sold part of its small share in Shopify earlier this year based on the share's performance, according to CEO Ross Gerber.
"We don't have a big position," he said. "If I did, I would sell a little more safely."
Meanwhile, Gerber said he still "loves" the company and is surprised that it has not been acquired by a major rival like Amazon yet. 19659015] More must-read stories from Fortune :
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