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Trends & Analysis
News

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News

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Asset Watch

A healthy correction for Shopify?

Thursday, February 15, 2024

Investors staged a buyer’s strike on Feb. 13, as a hotter-than-expected U.S. inflation print deflated risk assets. And with Shopify slumping by more than 13%, solid earnings weren’t enough to outweigh the pessimism.
However, while management’s warnings of higher marketing and employee compensation costs spooked the bulls, Jefferies analyst Samad Samana said the tepid guidance lowers the bar for next quarter.
“When you think about the forward expectations, you almost can’t judge them for not being perfect there because they have this pattern of being conservative,” he said. “They’re almost setting us up for another round of better-than-expected results.”

Though earnings sell-offs typically last two or three days, a buying opportunity could still arise when the dust settles.

Shopify’s July 2023 highs and January 2024 lows are near $71, and both could act as support if the pullback continues. Likewise, the 100-day moving average was a key support level in late 2022 and early 2023, and it resides near $68. If Shopify takes out the February 2024 lows near $76, the bulls may look to re-enter in the $68 to $71 range.

Rising U.S. Treasury yields amplified the negativity on Feb. 13, and the last time long-term interest rates rose dramatically, stocks performed poorly. Consequently, if yields continue their ascent, Shopify may have further to fall before the risk-reward becomes favourable.

So, will $76 hold, or does Shopify’s correction have more room to run?


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