One analyst speculated that Shopify’s sales could take a substantial hit as a result of Amazon’s Buy with Prime program.
What went down is this:
Shares of Shopify (SHOP -3.44%) were trading lower today after two different analysts issued notes on the stock that were in dispute with one another. An update from UBS, which reiterated a sell rating on the stock, appeared to have the desired effect on the investors. Additionally, it appeared as though the widespread decline in technology equities today was a factor that worked against Shopify share prices.
The stock had lost 3.5% of its value as of 11:45 a.m. Eastern time.
Then what?
UBS analyst Kunal Madhukar reaffirmed a sell recommendation on Shopify, citing the risk posed by Amazon’s Buy with Prime program, which is scheduled to go live tomorrow for all qualifying suppliers. According to Madhukar, the implementation of Buy with Prime may put at risk between 2% and 6% of Shopify’s gross profit and anywhere from 6% to 14% of the company’s revenue.
Madhukar admitted that there was a great deal of ambiguity over the possible implementation of Buy with Prime, but he advised investors to be aware of the risk. The price objective that Madhukar has set for the stock remains at $34, which indicates a decrease of 32% compared to the stock’s closing price on Friday.
At the same time, Darren Aftahi from Roth Capital raised Shopify from neutral to buy, adding that it is no longer necessary to make the challenging comparisons with the surge that occurred during the Covid-19 pandemic. According to Aftahi, the company has the potential to achieve a sales rise of up to 20% in 2023. In addition to this, he approves of the company’s recent decision to increase pricing and is of the opinion that the stock ought to be valued higher. Aftahi increased his price target on the stock, moving it up to $56 from $38.
What happens next?
The disparity between the two analyst notes that were just discussed highlights the conundrum that Shopify investors are facing right now. Recent news on Shopify stock, including good sales over Black Friday weekend and its recent price hike, has generally been encouraging, and the stock has rocketed higher so far this year as a result. Shopify has just increased the price of one of its plans.
Nevertheless, investors ought to take the expansion of Buy with Prime into serious consideration as a concern. There is still a lot of development left in e-commerce, and the stock is down substantially from its top in late 2021. We will learn more after its expansion date, but there is a lot of upside potential for Shopify if it can neutralize the danger posed by Amazon’s Buy with Prime program.
