Todd for CNBC: Why We’re Bullish on Shopify (SHOP)

This exclusive article was written by Todd Gordon for CNBC, offering his latest market insights and the rationale behind adding Shopify (SHOP) to the Active Opportunities portfolio.

Shopify is the one stop shop to help small and medium size businesses transact business online. There was an explosion in new online business formations during COVID and the number of new monthly business applications has maintained. However, the company is starting to diversify by onboarding larger brands such as Reebok, Overstock, and Barnes & Noble, which will stabilize revenue streams. We just added SHOP to our Active Opportunities portfolio on Monday May 12th and see upside ahead.

Starting on the weekly chart we see a sharp decline following the pandemic as entrepreneurs rushed to open their virtual stores as we were forced home. Since then the stock has recovered in a rythmical uptrend defined by the dashed parallel trend channel. The all-time high of $176 could be in reach.

Moving down to the daily chart we see an inverse head and shoulder pattern forming (3 curved blue lines) setting up a breakout of the downtrend resistance line. There was an accompanying explosion in volume with 2, 30M+ share days compared to the average daily volume of 12.8 million. This was sparked from an earnings report and a surprise announcement that SHOP was added to the Nasdaq 100 index (as MongoDB -MDB was dropped).

SHOP reported earnings last week with 26.8% revenue growth vs same quarter last year. EPS non-GAAP was $0.25, a 25% growth compared to the same quarter last year. But GAAP earnings were a miss at a loss of (0.53) vs expectations of $0.17. Diving into that a bit the company reported that they lost about $1.04 billion in unspecified equity investments and does not reflect Shopify’s core business operations. These investments are both public and private investments and management stressed that these do not reflect negatively on the company health. Watching the price action, the stock opened down on May 8th following earnings and then closed in the top end of the range. Friday was an inside day (vs Thursday) and today following the Chinese trade news SHOP ripped higher Monday by 13%. The company has minimal exposure to the Chinese tarrif situation, but the merchants on the platform certainly do. I didn’t love buying a stock on such a big up day (Monday), but I think the resistance level was $100.60, which is now broken acting as support.

Let’s see if the stock can move higher, though I fully acknowledge the hefty forward valuation the company faces. Looking back up at the weekly chart on the lower panel we see steady top line revenue growth figures above 20% since 2019 and going forward into 2026. EPS is expected to dip in 2025 at $0.34 (this is GAAP earnings), but re-accelerate in 2026. Non-GAAP 2026 earnings expected are $1.41 equating to 76 times forward earnings. The company needs to grow into this valuation with increased earnings expectations by expanding their multiple offerings.

-Todd Gordon

(DISCLOSURES: Gordon owns SHOP in his wealth management company Inside Edge Capital, LLC. Charts shown are Deepvue.com )