Shopify stock has rebounded in the past few months, reaching its highest level since January 13 this year. It has soared by 80% from its lowest level in May, bringing its market capitalization to over $205 billion. This rally may continue after invalidating the double-top pattern at $158.
Shopify stock has jumped after Muse partnership
SHOP stock has been in an upward trend in the past few weeks, helped by its recent partnership with Meta Platforms. In a statement, Shopify said that users can use Muse to manage their stores, including adding products, collections, inventory, and orders. The partnership came after Amazon blocked Muse.
Investors believe that Shopify may benefit from the new era of agentic shopping as people will use these agents to shop. Indeed, data shows that traffic to American retail sites from AI sources has jumped by 393% this year, and this trend may continue.
Shopify will benefit from all this because it is the biggest provider of e-commerce software globally. Its business strategy involves making money by charging website owners a monthly free. In addition to this, the company makes money by taking a cut for all transactions made by the websites. As such, as agentic commerce grows, so does the commission it makes.
Shopify’s revenue and profitability growth are continuing
The most recent earnings report showed that its revenue and profits are doing relatively well and that more companies are moving to its platform. Some of the recent additions to the platform are Guess, Fred Segal, AVON, and Arhaus.
Its results showed that the GMV jumped to $116 billion from $101 billion in the first quarter and $88 billion in the same period last year. Its payment processing jumped to over $78 billion in the quarter from $36 billion in Q1’24.
Analysts expect that Shopify’s business will continue to grow in the near term. The average estimate is that its annual revenue will jump by 31.9% this year to $15.25 billion. After that, the company is expected to hit $19.1 billion. At the same time, its earnings per share (EPS) is expected to keep rising.
The main challenge that Shopify investors face is that its valuation has become elevated. It now has a forward price-to-earnings ratio of 79.2, much higher than the technology sector average of 23. The multiple is also much higher than other companies, including faster growers like Micron and Nvidia.
These multiples likely explain why analysts have a mild outlook for the company. For example, Mizuho has a target of $180, while Wedbush has a target of $176.
Shopify stock technical analysis
SHOP stock chart | Source: TradingView
The daily chart shows that the SHOP stock bottomed at $128.97 in May this year and then started an uptrend. This rally continued after it published its financial results in August this year.
The stock has now moved above the important resistance level of $221, its highest point on August 13. It has invalidated the double-top pattern whose neckline is at $171.30.
Shopify has also formed a golden cross pattern, a common bullish continuation sign. Also, it remains above the Ichimoku cloud indicator, while the Percentage Price Oscillator (PPO) has moved above the zero line. Also, it formed an inverted head-and-shoulders pattern.
By invalidating the double-top pattern, chances are that it will continue rising, potentially to the psychological level of $250.
The post Shopify stock has crossed a crucial resistance: will the rally persist? appeared first on Invezz
