SHOP Brushes Off Pre-Earnings Bear Notes

Two analysts lowered their price targets ahead of the event

Deputy Editor
Apr 26, 2021 at 1:38 PM
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E-tail name Shopify Inc (NYSE:SHOP) is all set to report its first-quarter results before the open on Wednesday, April 28, and several members of the brokerage bunch are chiming in ahead of the event. Specifically, Baird and CIBC slashed their price targets to $1,550 and $1,325, respectively. Despite this, SHOP is up 4.4% to trade at $1,147.46 this afternoon. 

Some of this positive price action could be coming from SHOP's rebound off the 200-day moving average -- an area of support the equity has only breached briefly during the past couple years. The stock is contending with recent pressure at its 20-day moving average, however, and since its mid-February all-time peak just below the $1,500 level, SHOP has lost roughly 23%. 

Circling back to analyst sentiment, it looks like the brokerage bunch is split on Shopify stock. Of the 21 covering the equity, 14 call it a "strong buy," 11 say "hold," and one lone wolf considers the online retail name to be a "sell."

Options traders have been overwhelmingly bullish, meanwhile. In fact, at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), SHOP sports a 10-day call/put volume ratio of 2.30, which stands higher than 95% of readings from the past year. This means calls are being picked up at a much quicker-than-usual clip. 

Despite its upcoming earnings report, options traders are still pricing in relatively low volatility expectations for Shopify. This is per SHOP's Schaeffer's Volatility Index (SVI) of 49%, which stands higher than only 10% of readings from the past 12 months. 

Digging deeper, it looks like these traders are pricing in a 10.7% post-earnings swing for the stock this time around, which is slightly larger than the 6.1% move SHOP has averaged during its past eight next-day sessions, regardless of direction. Looking back, the equity does have a history of mostly positive returns the day after its quarterly reports over the past two years, though its last two returns were lower. 

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