Shares of Shopify Inc. SHOP were falling about 1% in after-hours activity Monday after Evercore ISI analyst Mark Mahaney cut his rating on the e-commerce company to in-line from outperform. Mahaney sees the risk-reward balance on Shopify shares as “less compelling” after they’ve nearly doubled over the course of 2023, though admittedly that surge followed a 75% slide in 2022. “We believe the YTD [year-to-date] surge in SHOP shares — driven by a stabilization in fundamentals, material new cost measures, and a strategic step-away from a fully integrated shipping/logistics — is well warranted,” he wrote. “But we see few clear catalysts going forward.” Mahaney’s downgrade is “primarily a valuation call,” he added. Mahaney flagged that his $69 target price on Shopify shares was based on a 10-times multiple of enterprise value to sales. Within his internet coverage, only Trade Desk Inc. TTD had a higher multiple at 17-times, and while the advertising-technology company boasts a similar revenue-growth outlook to Shopify, it has more consistent historical margins.
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