We recently published a list of Jim Cramer is Talking About These 10 Stocks as Markets Rebound. Since Shopify’s Inc (NYSE:SHOP) ranks 5th on the list, it deserves a deeper look.
Jim Cramer in his latest program on CNBC talked about the latest rebound in the markets followed by a major selloff on Monday, saying we can “fret” about the interest rates, jobs market or mortgage rates, or we can just buy the stocks of “tremendous” companies and hold on to them.
“Stock prices have become so dependent on the macro, the carry trade, the Fed chatter, that it’s impossible to give you a pat answer even as I’ve told you over and over again that corporate America is doing much better than anyone would expect at this point in the cycle,” Cramer said.
Cramer lamented yet again that people believe a 25bps decline in interest rates could somehow “motivate” people to increase spending and on these hopes they often buy “phony” ETFs.
Cramer also said that the Fed won’t begin to cut rates until it sees consumers “rebelling” against higher prices forcing companies to roll back price increases to pre-COVID levels. Jim Cramer believes we now have an “empowered consumer” who is willing to make choices and choose options that are cheaper and better.” He said that during the pandemic, amid higher liquidity, people were willing to accept higher prices, but not anymore.
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s talking about. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Shopify Inc (NYSE:SHOP)
Number of Hedge Fund Investors: 65
Jim Cramer was asked about Shopify in a latest program, here is what he said:
“I like that stock very very much. It has come down a lot, and I think it’s a really really good position to be able to take.”
Cramer said that Shopify had to spend a lot of money which they didn’t want to but “it’s really paying off.”
Shopify threw it out of the park with its stunning Q2 results. Free cash flow in the period rose a whopping 240% to $333 million. The company saw a 21% year-over-year revenue growth, driven by a 22% increase in gross merchandise volume (GMV) to $67.2 billion, though GMV growth slowed slightly from the previous quarter. The Subscription Solutions segment, which includes all subscription plans, saw a 27% increase in revenue to $563 million. This segment benefits from potential price hikes, which accelerated growth last year. Merchant Solutions, Shopify’s largest revenue contributor, generated $1.48 billion, reflecting a 19% year-over-year increase.
Shopify expects third-quarter revenue to grow in the low-to-mid-20s percentage range, surpassing the consensus estimate of 21%. While SHOP’s forward P/E is high, hovering near 60, the stock bulls believe the company’s EPS growth expectations of about 43% and Shopify’s rapid expansion in gross merchandise volume and free cash flow justify this valuation.
BofA added Shopify Inc (NYSE:SHOP) to its list of the best of breed stocks for the third quarter of 2024. Wall Street continues to shower positive ratings and comments for the Canadian ecommerce store platform Shopify Inc (NYSE:SHOP). Goldman Sachs analyst Gabriela Borges upgraded the stock to Buy from Neutral and increased their price target for SHOP to $74, saying Shopify Inc (NYSE:SHOP) investments in marketing are “about to pay off” and will drive revenue growth into 2025.
JPMorgan started covering the stock with an Overweight rating. Analysts at JPMorgan said Shopify Inc’s (NYSE:SHOP) competitive advantages include product breadth, ease of use and scale. These moat points, according to the bank, will keep powering Shopify’s “industry-leading” growth.
Polen Focus Growth Strategy stated the following regarding Shopify Inc. (NYSE:SHOP) in its Q2 2024 investor letter:
“In the second quarter, we purchased new positions in Shopify Inc. (NYSE:SHOP). Shopify, a leading cloud-native commerce software platform, is a business we’ve been studying since 2018 and have long admired. Shopify’s business model combines 1) a mission-critical software business where merchants can run all their business operations from one dashboard and 2) a payments business with a long runway to increase attach rates and grow alongside merchants. Additionally, we believe the business possesses significant optionality to continue attaching existing merchant solutions and adding more merchant services as high-margin cross-sells. With several powerful tailwinds at their back (e-commerce, mobile commerce, social media, digital payments, seamless omnichannel, DTC, cloud software digitization) and a highly scalable business model, we think their growth will likely be stronger for longer than investors expect.”
Overall, Shopify Inc (NYSE:SHOP) ranks 5th on Insider Monkey’s list titled Jim Cramer is Talking About These 10 Stocks as Markets Rebound. While we acknowledge the potential of Shopify Inc (NYSE:SHOP), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SHOP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
