Photo by: Roberto Cortese
This SHOP stock has experienced a rather bumpy ride over the past year, experiencing many sharp increases and decreases. However, SHOP’s overall trend is downward, as its stock has lost 76.8% of its value over the past year. This analysis will determine a SHOP Stock forecast to determine if there is any hope for the SHOP stock.
You are probably aware that Shopify inc. (NYSE: SHOP) is a leader in the Software-Application space. In this analysis, we are going to look at some of the key financial ratios for Shopify to determine a price prediction for SHOP. Remember these price predictions take into account several assumptions (which I will highlight) to determine a future price. I’ll share my SHOP stock price prediction, then show you the approach and assumptions used to calculate the SHOP stock forecast.
Before we go any further, let me start by saying this, stock forecasting is hard. I don’t know what the future will hold, and neither do Wall Street Analysts. If they could accurately predict the future, they would be able to beat the S&P 500 and I would be extremely wealthy. What I can say is that we can use available data to determine a reasonable SHOP stock forecast and helps us make better investment decisions, so hopefully, you find this analysis useful.
SHOP Stock Forecast for 2025 is $55.03 Per Share
The Shopify inc. stock price prediction of $55.03 was derived from 2 main valuation methods (which are averaged for the final price target you see above). I’ll dive into the approach to show you how I determined how I “predicted” a stock price of $55.03 for SHOP.
- Shopify Financial Growth Metrics
- SHOP Comparable Companies Analysis
The Financial growth Metrics provide an analytics valuation approach to determining a reasonable SHOP stock forecast. The comparable companies analysis determines SHOP stock forecast by comparing SHOP’s financial ratios to the average financial ratios of a group of similar stocks.
SHOP Stock Forecast Using PE Ratio and EPS
For this part of the analysis, I am looking at the history of key financial metrics for Shopify inc. to forecast the stock into 2022 and 2025. Most investors know that historical performance does not guarantee future performance, but it is useful to see how SHOP has been trending.
SHOP’s Forward Earnings Per Share have been estimated to be 0.22. Furthermore, SHOP’s Forward P/E has been estimated to be 188.68. With this information, we can determine a SHOP stock forecast by multiplying the SHOP’s Forward P/E by its Forward EPS to give us a stock price prediction of $41.51 per share
There are other ways to predict the price of SHOP but I would argue that P/E, EPS, and Earnings Growth are the most commonly used financial metrics by analysts and investors. This is why I used them to forecast SHOP’s stock price.
SHOP Stock Forecast for 2025 Using Comparable Analysis
Who are Shopify inc.’s Competitors?
In order to undergo a comparable analysis, we need to outline SHOP’s main competitors. These competitors need to have; a stock, valid financial ratios, operations similar to SHOP, and a market cap similar to SHOP (if possible).
By keeping this in mind, I found the following list of companies to be some of SHOP stock’s closest competitors:
AMZN, SONY, SAP, IBM, NOW, INFY, SNOW, and UBER
Using a Comparable Analysis to Determine a SHOP Price Forecast
SHOP’s current ROA ratio is 1.54%, compared to the average ROA ratio of SHOP’s peers being 4.3%. This implies that SHOP is overvalued and their share price should change by a factor of -64.29% to be at fair value (based on SHOP’s ROA compared to the ROA of their peers).
SHOP’s current PEG ratio is 0.4, compared to the average PEG ratio of SHOP’s peers being 2.37. This implies that SHOP is undervalued and their share price should change by a factor of 497.92% to be at fair value (based on SHOP’s PEG compared to the PEG of their peers).
SHOP’s current P/E ratio is 311.25, compared to the average P/E ratio of SHOP’s peers being 59.91 . This implies that SHOP is overvalued and their share price should change by a factor of -80.75% to be at fair value (based on SHOP’s P/E compared to the P/E of their peers).
Overall, by taking an average of the 3 comparable analyses previously undergone, we can arrive at a SHOP comparable price target. By doing this, I arrive at a potential upside for the SHOP stock of 117.63%, implying a price target of $68.55.
Are the SHOP Analyst Ratings in Agreeance With Our Conclusion?
Analyst Ratings have provided a relatively strong indicator of future price movement, which is why they are used to (hopefully) support our SHOP stock forecast. There are a total of 47 analyst ratings for SHOP, which are distributed as follows:
25 Buys
22 Holds
0 Sells
All of the analysts are in consensus that the SHOP stock is either at or below its fair market value. This is very good to see as an investor as it signals that the analysts are very confident in the fact that the SHOP stock is close to bottoming out, and has the potential to make a comeback.
SHOP Stock Forecast and Price Prediction Summary
Should you buy SHOP? Well, based on the overall SHOP stock forecast of $55.03 per share, and the current price of SHOP being $31.50, I would agree with the analysts and say SHOP is a buy. Let me know what you think, happy to dive into other aspects of SHOP to help you make an informed investment decision.
Originally published at https://utradea.com.
