Shopify's Black Friday Sales Surge Raises Concerns Over Valuation

Shopify, the e-commerce platform, recorded a significant 22% increase in Black Friday sales compared to the previous year. Despite this surge in performance, a team of analysts from Piper Sandler has decided to downgrade Shopify stock due to what they perceive as "an untenable valuation."

In a note released on Tuesday, Piper Sandler analysts Clark Jeffries and Wayne Trinh downgraded Shopify stock from Neutral to Underweight, while also reducing their price target from $58 to $56.

Although Shopify stock experienced a 0.6% decline to $73.22 in early Tuesday trading, it is worth noting that shares have surged an impressive 111% this year. However, the revised price target proposed by Piper analysts suggests a potential downside of nearly 25% in the future.

Jeffries and Trinh acknowledged the various factors that contribute to Shopify's growth and profit, such as opportunities to expand market share and adjust client pricing. However, they believe that the current share price incorporates overly optimistic assumptions.

Nevertheless, it is important to emphasize that Shopify continues to perform well. The Piper analysts clarified that their rating change is not driven by macroeconomic conditions, execution concerns, or short-term demand. Instead, they anticipate some moderation in fundamentals by 2024 as the company navigates events unique to 2023.

On the other hand, Oppenheimer analysts led by Ken Wong expressed a more positive outlook for Shopify. They have assigned an Outperform rating and set a price target of $80. In their report published on Tuesday, the Oppenheimer team highlighted the potential of Shopify's valuation beyond the Black Friday and Cyber Monday period, while also recognizing opportunities to increase prices for its offerings.

Shopify recently exceeded market expectations with its third-quarter financial results. Looking ahead, the company has scheduled an Investor Day on December 5th.