What happened
Stocks of assumed growth stocks Shopify (NYSE: SHOP) did not rise in Thursday’s trading, closing the day down 3%. This probably surprised a lot of investors, as Shopify stock was upgraded today.
So what
In a morning note, Evercore ISI raised its rating on the Shopify stock to outperform and set a price target of $ 1,770 on the stock, which is $ 200 more than the price Goldman Sachs assigned to the stock. Shopify share just three days ago. In Goldman’s note, the banker called Shopify a stock “well positioned for the long term,” but likely to suffer from low sales and higher costs in the short term as Shopify upgrades its platform to improve performance. ‘client experience.
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Evercore, on the other hand, agrees with Goldman on the positives of the stock, calling Shopify “one of the highest quality assets” it covers and predicting long-term growth from it. a “powerful multi-year tailwind” (says TheFly.com). But Evercore sees little risk that Goldman fears in the short term, arguing instead that Shopify’s valuation has been “dislocated” from intrinsic value – implying that the stock is a buy, whatever. What is happening with sales or costs this coming year.
Now what
The problem is, Evercore’s poo over the risks Shopify faces seems to fly in the face of investor worries about today’s economy. On the one hand, the omicron variant of the coronavirus is rampant, with several colleges announcing yesterday that they are putting the finals online and hoping to send students home sooner. On the flip side, the Fed just announced plans to hike interest rates three times in 2022 (as opposed to previous forecasts of zero times) – and hike rates three more times in 2023.
Such an economic tightening – which tends to reduce the flow of money into the economy – is also being imitated around the world, with the Bank of England, for example, announcing an immediate hike in interest rates to 0.25. %, and the European Union Central Bank saying that it will reduce asset purchases (the result of which would be Also less money flows into the economy).
While such measures may be necessary to stem rising inflation rates, they are also likely to slow economic growth – and shopping – which is, after all, built into the Shopify name. Overall, then, I have to think Goldman Sachs has the best of that argument, and Evercore ISI is upgrading Shopify stocks at exactly the wrong time.
This article represents the opinion of the author, who may disagree with the “official†recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.
