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Hedge Funds

After a 72% Decline, is Most Bad News Out?

Shopify (NYSE: SHOP) (TSE: SHOP) stock has slumped over 72% this year. Given the considerable decline in its stock price, the recent buying by market participants (SHOP stock is up about 22% in one month), and easier year-over-year comparisons ahead, most bad news appears to be out. However, with negative signals from hedge funds and insiders, the upside in SHOP stock could be limited. 

SHOP Stock: Hedge Funds Reducing Their Stakes

Per TipRanks’ Hedge Fund Trading Activity tool, hedge fund managers have lowered their holdings in SHOP stock by selling 23 million shares in the last quarter.

Five hedge fund managers, including ARK Investment Management’s Catherine Wood, have reduced their holdings in SHOP stock. Meanwhile, two hedge fund managers, including Bridgewater Associates’ Ray Dalio, closed their position in SHOP stock.

Nevertheless, three hedge funds, including Generation Investment Management’s David Blood, increased their holdings in SHOP stock.

Insiders are Selling SHOP Stock

According to TipRanks’ Insider Trading Activity tool, corporate insiders have sold SHOP stock in the last quarter. Per the tool, Shopify’s non-executive Director John Phillips, President Harley Finkelstein, and CFO Amy Shapero sold SHOP stock in the form of an Informative Sell.

Overall, SHOP’s corporate insiders have sold $3.1 million worth of shares in the past three months.

What is the Prediction for Shopify Stock?

Analysts are cautiously optimistic about Shopify’s prospects. SHOP stock has received 12 Buy and 14 Hold recommendations for a Moderate Buy rating consensus. Further, Shopify’s stock price prediction of $45.50 implies 13.9% upside potential.

However, with negative signals from hedge funds and insiders, SHOP has an “underperform” Smart Score of 1 out of 10

Conclusion: Macro Concerns to Hurt, but Growth Could Accelerate

William Blair analyst Matthew Pfau is bullish on SHOP stock. The analyst stated, “We still expect to see some revenue growth acceleration in the second half of the year, driven mostly by easier comps, take-rate improvement, and Deliverr.” 

Pfau expects that SHOP’s “revenue growth can return to the mid-20% range once the macro environment improves and newer products become more material growth drivers.” 

However, the persistently high inflation and economic reopening could continue to hurt Shopify’s growth. 

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