Shopify Stock Sinks Lower After Pre-Earnings Bear Note

CIBC slashed its price target by more than 45% ahead of the event

Deputy Editor
Feb 14, 2022 at 1:42 PM
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E-tail name Shopify Inc (NYSE:SHOP) is set to step into the earnings confessional before the open on Wednesday, Feb. 16, where it will report its fourth-quarter results. At least one analyst already slashed its price target ahead of the event, and it was a pretty substantial cut. Specifically, CIBC cut its price objective by more than 45%, moving down to $950 from $1,750. At last check, SHOP is down 0.7% to trade at $848 this afternoon. 

Shopify stock has been thwarted by the 20-day moving average on multiple occasions recently, and the trendline still remains well just overhead. Further, after nabbing an all-time high of $1,762.91 on Nov. 19, SHOP shed 48.3% in the next three months and is now flashing a 41.2% year-over-year deficit.

SHOP Chart Feb 14

Circling back to analyst sentiment, it looks like the brokerage bunch is split on Shopify stock. Of the 28 covering the equity, 15 call it a "strong buy," one says "buy," 11 rate it a  "hold," and another considers the online retail name to be a "sell." Meanwhile, the 12-month consensus price target of $1,467.66 is a staggering 70.7% premium to its current level of trading, which could mean more firms will follow CIBC's lead in the near future.

Meanwhile, options traders have been overwhelmingly bullish. Specifically, short-term options traders have been call-biased, per Shopify stock's Schaeffer's put/call open interest ratio (SOIR) that sits in just the 3rd percentile of its 12-month range. 

It's also worth noting the security's Schaeffer's Volatility Scorecard (SVS) sits at 87 out of a possible 100. This implies that SHOP has exceeded options traders' volatility expectations over the past year.

Digging deeper, it looks like these traders are pricing in a 16.7% post-earnings swing for the stock this time around, which is much larger than the 6.2% move Shopify stock 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, with returns of 11.4% and 7% in April and October, respectively. 

 

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