Shopify is the IBD Stock Of The Day as it bullishly rebounds, offering up a new entry in the process.
The Canadian company sets up e-commerce websites for small businesses. It also partners with others to handle digital payments and shipping.
Current earnings are not ideal, but future profits are seen surging, with analysts expecting mammoth growth of 715% in 2023, according to MarketSmith data.
Shopify stock is actionable as it rebounds from its 21-day line and moves above a trendline, topping its recent high of 61.49. Shares jumped 6.2% to close at 63.66 on the stock market today.
It also is working on a new base, though it is slightly too deep to qualify as a flat base. More conservative investors may opt to see how this progresses.
IBD Stock Of The Day Offers Entry
SHOP has made good progress since gapping up above a buy point of 49.86 from a cup with handle in early May. Despite recent progress, it still has a long way to go before it comes close to its all-time high of 176.29, which it reached in November 2021.
All-around solid performance has netted Shopify stock a near-perfect IBD Composite Rating of 98.
Stock market performance is its strongest suit. SHOP's Relative Strength Rating is 97, putting it in the top 3% of stocks in terms of price performance over the past 12 months. It also is up around 75% since the start of the year.
Earnings performance is the Achilles' heel at the moment, with Shopify's EPS Rating coming in at 60 out of 99. But earnings growth is seen as being robust going forward. In addition to the 715% EPS growth seen for fiscal 2023, Wall Street expects 66% growth in 2024.
Analyst Backs Shopify Stock, Cites AI
Strong performance has netted Shopify stock a spot on the IBD Leaderboard list of top equities.
CFRA analyst Angelo Zino is rating Shopify stock as a buy with a 68 target. He hailed the firm's move to sharply cut expenses and to divest its logistics business. Artificial intelligence initiatives are also seen as possible catalysts.
"We like greater penetration for Shopify Payments as well as AI initiatives," he said in a May 27 research note. "We think subscription revenue, about a quarter of sales, will be bolstered by higher pricing (effective January for new customers and April for existing) should support higher revenue ahead."
The company announced the sale of its delivery and logistics business to Flexport when earnings for Shopify were reported back in May. The sales price of the deal was not disclosed.
Please follow Michael Larkin on Twitter at @IBD_MLarkin for more analysis of growth stocks.
