Shopify Deserves To Fall Off Best Idea List
Shopify (SHOP) has done everything to deserve dropping off an analysts Best Ideas list. The company recently sold shares in a secondary offering and has a new CFO, but the prime reason to avoid the stock now is a completely different reason.
Ironically, Wedbush dished Shopify due to the analyst leaving the firm, but the move was timely. In February, the company sold 4.8 million shares at $137 to raise over $650 million. As well, Shopify has a new CFO starting April 2. Not a very good combination. CFOs rarely leave such a strong story.
The biggest issue though is that the company is a modern day Ebay (EBAY) trading at a ridiculous valuation. Shopify now trades at 3.5x the forward P/S multiple of Ebay.
As the 70%+ growth rate in 2017 turns into 35% in 2019, the multiple will contract leaving limited upside for shareholders despite the fast growth.
Recommending a stock trading at these levels with a market cap approaching $15 billion is impossible.
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