Shopify Inc. (NYSE:SHOP) released Q4 and 2021 full-year results today February 16th, 2022. The company remains in the red having reported a loss of $2.95 per share. However, the company recorded a 40% growth in revenues but not even this gain in revenues was enough to stem the bleeding share price.
Shopify is a large growth stock with a narrow moat. Considering the 40% growth in revenues, the analysis considers that Shopify is justifiably a good growth stock to hold. Investors, however, need to understand the risk environment and how it plays into the market valuation of the company.
Being a narrow moat company means little competitive edge in the market. Shopify essentially sells software such as point of sale systems and e-commerce ecosystems to merchandising enterprises.
With the change in shopping behaviour forced by the COVID pandemic, the company’s model was hurt leading to reduced gross merchandise value. However, Shopify is recording growth in the e-commerce space.
Together with the return to normalcy in shopping behaviour in the coming year, it can be expected that Shopify will continue growing revenues.
SHOP breaks below support at $850
Source – TradingView
From a technical point of view, the operating losses recorded by Shopify explain the continuing price correction. At press time, SHOP traded at $656 on the NYSE. This was after breaching a key support at $850 and $700.
The analysis notes that SHOP may find potential support around $650 or lower in the support zone starting at $534. The consensus fair value of the company remains unchanged at $850.
Shopify reported a 40% growth in revenues maintaining the large growth stock investment style. The shares price continues to be under pressure but may find potential support at $650 or lower at $534.
SHOP is currently undervalued considering the fair value of $850 and is a hold for long-term forecasted investors.
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