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On Wednesday, Baird analyst Colin Sebastian adjusted the price target on Shopify (NASDAQ: NASDAQ:SHOP) shares to $110.00 from the previous $135.00 while retaining an Outperform rating on the stock. The adjustment was based on a revised revenue estimate and the current market environment. According to InvestingPro data, Shopify's stock has experienced significant volatility recently, with a -23.41% return over the past week, though the company maintains strong fundamentals with a GREAT financial health score.
Sebastian noted that Shopify, akin to PayPal (NASDAQ:PYPL) and eBay (NASDAQ:EBAY), benefits from its asset-light model, which provides a degree of protection against macroeconomic downturns compared to inventory-laden online retailers. Shopify's merchants typically have a competitive edge due to the diverse selling tools available, marketing support, superior website design, and integration with social commerce platforms. These advantages could potentially attract more merchants and brands to Shopify during disruptive periods. The company's strong market position is reflected in its impressive 25.78% revenue growth over the last twelve months, with a healthy current ratio of 3.71x indicating robust operational efficiency.
However, the analyst also pointed out that Shopify's merchants largely operate in discretionary spending sectors, such as apparel and beauty, which may be affected by consumers facing higher prices. Consequently, Sebastian has reduced the 2025 revenue forecast for Shopify to $10.8 billion, which reflects a 21.6% year-over-year increase but falls below the consensus estimate of $10.95 billion. The adjusted operating income projection now stands at $1.93 billion, which represents a 17.8% margin and is also slightly below the consensus of $1.96 billion. For deeper insights into Shopify's valuation and growth prospects, InvestingPro subscribers can access comprehensive financial metrics and 18 additional ProTips that provide valuable context for investment decisions.
The new price target of $110 takes into account revised estimates and a contraction in sector multiples. This target is grounded on approximately 10 times the firm's 2026 revenue estimate, discounted back using a multi-year discounted cash flow (DCF) analysis and a sum-of-the-parts (SOTP) valuation. According to Sebastian, this places Shopify in the upper range of average Internet and Software (ETR:SOWGn) as a Service (SaaS) valuations, which typically span from 2 to 10 times enterprise value to revenue. Current valuation metrics from InvestingPro show the stock trading at a P/E ratio of 48.32x and an EV/EBITDA of 69.74x, reflecting the market's high growth expectations despite recent price volatility.
In other recent news, Shopify has been under the spotlight with various developments affecting its market outlook. Wolfe Research recently adjusted Shopify's price target from $140 to $90, maintaining an Outperform rating despite concerns about its high valuation and exposure to discretionary spending. This change reflects market conditions and potential risks, as analysts express caution about further stock price compression. Meanwhile, Deutsche Bank (ETR:DBKGn) reaffirmed its Buy rating and $150 price target on Shopify, citing confidence in the company's market positioning and its ability to benefit from retail trends like unified commerce and AI integration.
Shopify's CEO, Tobi Lutke, has encouraged staff to adopt AI tools to enhance productivity, emphasizing AI as a critical component in achieving the company's mission. This push for AI usage is seen as a strategic move to maintain competitiveness and foster innovation. In other developments, Affirm Holdings (NASDAQ:AFRM) Inc., a partner of Shopify, has maintained its Outperform rating from Mizuho (NYSE:MFG) with an $84 target, despite competitive pressures from Klarna's partnership with Walmart (NYSE:WMT). BTIG also upheld its Buy rating for Affirm with an $81 target, suggesting that the market's reaction to the Klarna-Walmart deal was an overreaction.
These recent developments highlight the dynamic landscape in which Shopify operates, with analyst ratings and strategic initiatives playing a significant role in shaping investor sentiment.
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