Shopify Bucking Broad-Market Selloff After Walmart Deal

SHOP was also upgraded to "overweight" by Piper Sandler

Assistant Editor
Jun 15, 2020 at 10:10 AM
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The shares of Shopify Inc (NYSE:SHOP) are surging this morning, last seen trading up 5.8% at $785.60, amid news that Walmart (WMT) is partnering with the e-commerce platform to expand its third-party marketplace website. Meanwhile, Piper Sandler hit Shopify with an upgrade to "overweight" from "neutral," and hiked its target price by $110 to $843. The analyst in coverage cited expectations that e-commerce penetration rates could potentially double or triple by 2030.

Despite Piper Sandler's moves, analysts are mostly cautious as a whole. Of the 24 in coverage, just seven brokerages rate the equity a "buy" or better while 16 sport a tepid "hold." Plus, the 12-month consensus price target of $733.40 is a slim 1.2% discount to current levels, leaving room for more price-target hikes in the near future.

After falling to an annual low of $305.30, Shopify stock promptly skyrocketed nearly 200% to hit an all-time high of $844 toward the end of May. While the shares have taken a breather since then, support has emerged at their 40-day moving average, a trendline that hasn't been breached since April 9. Year-to-date, SHOP has nearly doubled in value.

In the options pits, Shopify stock's 10-day call/put volume ratio of 1.62 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the elevated 82nd percentile over the last 12 months. This means there is a healthier-than-usual appetite for long calls of late. 

Shifting gears to today, its more of the same in the first hour of trading. Over 13,000 calls have changed hands already, double the average intraday amount and more than triple the number of puts traded. Leading the charge is the June 800 call, with new positions also being opened at the 850- and 900- strike calls in the same series.

The good news for those options traders is that the stock’s Schaeffer’s Volatility Index (SVI) of 60% sits in the 30th percentile of all other readings from the past year. This means options players are pricing in relatively low volatility expectations at the moment, a boon for premium buyers.

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