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On Tuesday, Wolfe Research made a significant adjustment to Shopify's (NASDAQ:SHOP) financial outlook, reducing the price target to $90 from the previous $140. Despite this change, the firm maintained its Outperform rating on the e-commerce company's shares. The adjustment comes as Shopify's stock has experienced a considerable decline in value, with InvestingPro data showing a 19.27% drop in the past week alone.
Shweta Khajuria of Wolfe Research pointed out that Shopify's shares are trading at a high multiple, specifically 39 times the projected 2026 EBITDA, which is considered expensive given the company's exposure to discretionary spending and categories affected by tariffs. This observation aligns with InvestingPro data, showing current P/E ratio of 50.11x and EV/EBITDA of 71.45x. Despite high valuations, the company maintains strong financial health with a GREAT overall score and impressive revenue growth of 25.78% over the last twelve months. The analysis indicates that direct-to-consumer (D2C) businesses may face more significant challenges than larger platforms like Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT).
Shopify has been active in launching new products, which is a positive development for the company. However, the analyst expressed concern about the potential for further stock price compression. This concern is due to a combination of factors, including the weakening consumer spending in discretionary categories and the stock's high valuation multiple.
The reduction in Shopify's price target reflects the current market conditions and the potential risks facing the company. Wolfe Research's commentary suggests a cautious outlook for Shopify's future stock performance, even as the firm continues to classify the stock as Outperform, indicating an expectation that it will perform better than the overall market.
In other recent news, Shopify has been in the spotlight with several key developments. The company has reaffirmed its commitment to artificial intelligence, with CEO Tobi Lutke urging employees to integrate AI tools into their workflow to boost productivity and innovation. This move underscores Shopify's focus on leveraging technology to enhance its platform's capabilities. Meanwhile, Deutsche Bank (ETR:DBKGn) and DA Davidson have both maintained their Buy ratings on Shopify stock, each setting a price target of $150. Analysts from Deutsche Bank have expressed confidence in Shopify's market positioning, citing its ability to capitalize on trends like unified commerce and personalization. DA Davidson highlighted Shopify's robust fourth-quarter results for 2024 and projected mid-twenties revenue growth for 2025.
In the financial technology sector, Affirm Holdings (NASDAQ:AFRM) Inc. has also been making headlines. Mizuho (NYSE:MFG) Securities and BTIG have both reiterated their positive outlooks on Affirm, despite recent competitive pressures. Mizuho maintained its Outperform rating with an $84 target, emphasizing the importance of Affirm's partnership with Walmart, which accounts for 5% of its Gross Merchandise Volume. BTIG, maintaining a Buy rating with an $81 target, addressed concerns over Affirm's competitive landscape following Klarna's partnership with Walmart. Despite these challenges, BTIG analysts see significant opportunities for Affirm to gain market share from traditional finance companies. These developments reflect the dynamic nature of the e-commerce and financial technology sectors, where companies like Shopify and Affirm continue to adapt and thrive amidst evolving market conditions.
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