Why are Analysts Skeptical of Shopify’s Rally?

Shares of Shopify Inc (SHOP) rallied to a 20-month high Wednesday and soared +54% in November, the company’s biggest monthly gain ever. Shopify’s share price has more than doubled this year but remains more than 50% below an all-time high posted in 2021.  However, with the stock trading at about 5% over the average analyst share price target, few analysts expect this year’s rally to continue.

Despite the recent surge in Shopify shares, many analysts remain unconvinced that the e-commerce platform has turned the corner.  According to Bloomberg data, fewer than half the analysts that follow the company recommend buying the stock, a rate well below that of other major internet companies. Earlier this week, Piper Sandler cut their rating on Shopify to the equivalent of a sell, saying, “Shares hold an untenable valuation in our view, as growth and profit assumptions embedded in chares today are too aggressive.”