Do Not Buy Shopify Stock

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Do Not Buy Shopify Stock

Why You Should Not Buy Shopify Stock

Shopify's earnings report was not good, as it showed the growth rate was lower than last quarter. However, the revenue for Q4 was better than forecasts, but it failed to impress the investors.

After all, the investors want fast growth in the tech sector with the arrival of AI. So, even the growth rate of companies like Shopify fails to impress the market.

Shopify Has A High P/E Ratio

But the recent decline in the Shopify stock price has led many to wonder if now's the right time to buy the stock. But a quick look at the Shopify stock shows now is not the right time to buy it.

There's no doubt that the revenue growth of Shopify remains solid with a 31% y/y increase. On top of that, the net income of Shopify is also up by 30% y/y.

The free cash flow is also yet another strength of Shopify, as it increased 17% y/y and reached $715 million. And if we look at the full year, the free cash flow has increased 26% y/y and already crossed the $2 billion target.

Shopify has also launched its own share repurchase program as it has ample free cash flow and little to no debt. Last but not least, Shopify is also using AI, which has helped to automate the tasks and workflows for merchants.

The main reason why you should not buy Shopify stock is its high valuation. The forward P/E of Shopify is in the sixties, and that's just too much if we look at other tech stocks from the US market.

After all, there are far better tech stocks with a very reasonable or low P/E ratio in the US market. So, while Shopify has a lot of good things going on, it still has a very high valuation.

A better approach is to wait for the Shopify stock price to go down so that its P/E ratio becomes more reasonable. And if you don't want to wait, then look at other tech stocks.

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