We recently published a list of Jim Cramer October Portfolio: Top 10 Stocks to Buy and Sell. Since Shopify (NYSE:SHOP) ranks 5th on the list, it deserves a deeper look.
Jim Cramer in a latest program commented on the latest stronger-than-expected jobs report, calling it “good news” and expressed surprise at how the stocks “roared” on the report.
“For years, we have been taught that when buying yields go up, stocks go down. Ever since the Fed gave us that double rate cut last month, we have been afraid that they have been acting so decisively. Something might be wrong with the economy—something they knew about, but we didn’t.”
Jim Cramer was also surprised by bank stock gains. He said that these stocks probably rose because a strong employment situation means fewer bad loans. Cramer also said we might be heading to “no landing at all.”
“People have a collective sigh of relief that we weren’t headed for a crash landing. They held onto their stocks with both hands.”
For this article we watched several latest programs of Jim Cramer and picked 10 stocks he’s talking about. With each company we have mentioned its number of hedge fund investors. 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).
Shopify Inc (NYSE:SHOP)
Number of Hedge Fund Investors: 56
A caller recently asked Jim Cramer whether he’s still bullish on Shopify. Cramer said yes and made the following comment:
“I think that Shopify Inc (NYSE:SHOP) is at a great level to buy. I think Harvey Finkelstein (company President) is doing a terrific job. The stock should be perfect.”
Shopify Inc (NYSE:SHOP) 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.
Rowan Street Capital stated the following regarding Shopify Inc. (NYSE:SHOP) in its Q2 2024 investor letter:
Shopify Inc. (NYSE:SHOP) has been an incredibly rewarding investment for those lucky enough to get in early after the company’s initial public offering (IPO) in 2015. The shares have delivered a return of 2,600% or 42% annual. Its revenues have grown at 49% per annum since the end of 2014 from $105 million to estimated $8.6 billion in 2024. The massive e-commerce market is a huge opportunity, as the company’s growth indicates. As you tell from the chart below, revenues are forecasted to grow above 20% for the next 3 years. Keep in mind, Shopify has been around for more than a decade — and it’s still growing at these high rates.
We have owned Shopify for only 2.5 years, establishing our position in the first quarter of 2022 at a cost basis of $60, after the stock collapsed from its highs of $169 in November 2021. In hindsight, our entry may have been a bit premature, as the stock continued to plunge, eventually reaching a low of $27 in October 2022. However, such market movements are inherently unpredictable, and we seized the opportunity to invest in a company we had long admired…” (Click here to read the full text)
Overall, Shopify Inc (NYSE:SHOP) ranks 5th on Insider Monkey’s list titled Jim Cramer October Portfolio: Top 10 Stocks to Buy and Sell. 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.
