5 Most Overvalued Companies According to the Media

1. Shopify Inc. (NYSE:SHOP)

Flagged Overvalued by Number of Articles: 4

Shopify Inc. (NYSE:SHOP) is an Ottawa, Canada-based provider of a globally famous e-commerce platform.

Experts believe that the stock is trading at an inflated valuation, and the company needs to deliver strong bottom-line growth to justify the valuation in an environment of high economic uncertainty. Shopify Inc. (NYSE:SHOP) stock is presently exchanging hands at a forward EV/Sales multiple of 8.20x, reflecting a premium of 221.5% when compared to the sector median forward EV/Sales multiple of 2.55x only. The forward P/S ratio of 8.86x also represents a premium of 246.2% when compared to the sector median of 2.56x.

On December 8, Kunal Madhukar at UBS commenced coverage on Shopify Inc. (NYSE:SHOP) stock with a target price of $30 and a Sell rating. The analyst highlighted that the current forecast for the company’s gross merchandise value (GMV) and revenue still does not incorporate the possibility of a global recession in 2023.

Artisan Partners shared its outlook on Shopify Inc. (NYSE:SHOP) in its Q3 2022 investor letter. Here’s what the firm said:

“Shopify Inc. (NYSE:SHOP) is a leading e-commerce platform supporting over 2 million merchants with software, online storefronts and payments technology. Like Uber, Shopify returned to mid-cap territory during Q2 as the company’s profit cycle and share price have faced significant pressure. Earlier this year, the company began a phase of investments to support a range of future growth drivers, including Shopify Plus for larger brands, logistics services, international expansion, point-of-sale payments and social media-based commerce. With high inflation putting pressure on consumer spending, and with e-commerce activity normalizing after a massive pandemic spike, Shopify’s earnings have fallen sharply. While we have outstanding questions about the likelihood of success for the company’s capital-intensive logistics investments, we decided to take advantage of the stock’s >75% YTD decline and initiate a GardenSM position at a deep discount to our PMV estimate. Our thesis is predicated on our belief there is still a long runway for commerce to move online, and Shopify is well-positioned to win share of this market. The company has created an ecosystem of products (payment processing, financing, shipping, customer engagement tools, etc.), partners (TikTok, Google, Meta), sales channels and over 6,000 apps to help its merchants sell online and establish direct relationships with customers.”

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