Shopify stock price forecast: is SHOP a buy ahead of earnings?

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The Shopify (NYSE: SHOP) stock price has retreated sharply in the past few months as the rotation from growth to value has accelerated. The shares are trading at $854, which is about 51.65% from its highest level in 2021. They are trading near the lowest level since September 2020.

Shopify earnings

Shopify is one of the biggest e-commerce software companies in the world. The firm has a market capitalization of more than $107 billion and millions of sellers. 

It has several avenues of making money. For example, all sellers who sell using its platform pay a monthly or annual fee to the company. In addition to that, the company charges a small commission for all sales that these sellers generate.

Another way Shopify makes money is through its credit division. It uses its internal data to assess the creditworthiness of the customer and then extends loans to them. Further, Shopify offers CRM and other services.

In the past few years, Shopify has grown from a small Canadian company into one of the biggest competitors to Amazon. Its software is so popular such that Amazon directed it a few years ago when it shuttered a similar project.

The Shopify stock price will be in the spotlight this week as the company publishes its quarterly results on Wednesday. After recording a spectacular performance during the pandemic, analysts expect that the company’s revenue and growth has started to decelerate.

Precisely, analysts expect the company’s earnings will show that its revenue rose to $1.38 billion in the fourth quarter while its earnings per share rose to $1.31. In the previous quarter, Shopify generated revenue of $1.12 billion and an EPS of 81 cents. 

The strong performance will likely be because of the holiday shopping although investors will focus on the company’s cost structure.

Shopify stock price forecast

The daily chart shows that the SHOP stock price has been in a strong bearish trend in the past few months. Along the way, the stock has moved below the 25-day and 50-day moving averages and the 61.8% Fibonacci retracement level. 

The stock is also forming a bearish flag pattern. In price action analysis, this pattern is usually a bearish sign. Therefore, there is a likelihood that the Shopify stock price will break out lower in the coming days. If that happens, the next key support to watch will be at $780.

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