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  5. SHOP: Trying to understand analyst changes on SHOP. [Shopify Inc. Class A Subordinate Voting Shares]
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Q: Trying to understand analyst changes on SHOP. TD lists analyst 3 changes this week. One sell and 2 holds. On the surface, this could be interpreted as almost 3 sells. What indicators or factors might drive some analysts to come to this conclusion when others, including 5i, are much more upbeat, even bullish.
Asked on November 25, 2024
5i Research Answer:

Out of all 52 analysts covering SHOP, we see one as having a 'strong sell' rating, one as a 'sell', 20 at 'hold', 20 at 'buy', and 10 at 'strong buy'. 

The average price target is $162. We did see a price target downgrade from DZ Bank, but over the past couple of weeks mostly price target increases. 

A few of the price target downgrades were largely due to valuation concerns, as it trades at a 79X forward earnings multiple. 

We view valuation as quite important, but we also have seen many stocks that were once a 100X or more forward P/E go on a significant price run, as its fundamentals outgrew its valuation. For example, a stock growing its earnings at 100% a year can see its price go up 50% a year, and still have its valuations contract. We continue to like SHOP here.