The Shopify stock price rose on Wednesday after the Canadian company filed to change its US listing from the New York Stock Exchange (NYSE) to the Nasdaq. It moved back above $100 even though the listing change will not have an impact on its business. So, what next for the SHOP share price, and is it a good buy after forming a megaphone pattern?
Shopify stock has wavered this year
SHOP, the giant Canadian tech company, has wavered this year. After soaring to a high of $129.53 in January, the stock crashed for four consecutive weeks, reaching a low of $89.54 after it published strong financial results.
The data showed that Shopify’s quarterly revenue jumped by 26% in the fourth quarter to $8.9 billion. A 26% annual growth rate is a good one for a company that has been in business for many years.
The revenue growth accelerated after the company continued adding more large companies on its platform. Some of the top firms it added in the last quarter were firms lik David’s Bridal, Aldo, GameStop, and Warner Music Group.
Shopify’s growth also happened as more companies embraced its add-on solutions. In addition to the basic shopping tools, the company has unveiled more solutions like Shop Pay, PoS, Collabs, Promise, and Audience.
Shopify’s gross merchandise volume jumped to over $94.46 billion last quarter, while the free cash flow jumped to $611 million. It also achieved a cumulative gross merchandise volume (GMV) of $1 trillion, a sign that demand for its solutions is rising.
Most importantly, the management believes that the growth trajectory will continue. The guidance is that its revenue will grow at mid-twenties, while its free cash flow margin will be in the mid-teens.
Read more: Shopify stock is a better pick than Amazon: Mark Mahaney explains why
Opportunities and challenges
The most important opportunity that Shopify stock has is that it is the biggest player in its business. Amazon ended its software services and directed its clients to Shopify a few years ago. BigCommerce, its top direct rival, has largely fallen apart, with its stock crashing by over 90% since going public.
Shopify’s other opportunity is that its business has more room to upsell. In this, many companies start their journey looking for a software solution to launch their e-commerce sites. Over time, they use Shop Pay, its logistics tools, and other solutions.
Analysts are upbeat about the Shopify stock price and its financials. The average estimate is that its first-quarter revenue will grow by 25% to $2.3 billion, while its annual revenue figure will be $10.93 billion. The average Shopify stock price forecast among analysts is $134.5, up from the current $101.55.
However, the company also faces some potential challenges that may affect its performance. For example, it is one of the most overvalued companies in Wall Street, a situation that has persisted since its IPO. It has a trailing and forward P/E ratio of 66, much higher than the S&P 500 average of 21.
The other challenge is that many consumer-facing businesses may face growth issues because of Donald Trump’s tariff, which may affect consumer confidence.
Read more: Shopify stock price forecast: Morgan Stanley sees a 20% upside
Shopify stock price analysis
The weekly chart shows that the SHOP share price has been in a strong bullish trend in the past few months. It has remained above the 50-week and 100-week Exponential Moving Averages (EMA), a sign that bulls are in control for now.
Most importantly, the stock has formed a rising broadening wedge chart pattern. This pattern is made up of two ascending and broadening chart pattern. Therefore, the Shopify stock price will likely surge in the near term. The stock will likely retest the crucial resistance point at $130. More gains will be confirmed if it moves above that level.
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