There's no sugarcoating it. Shopify (NYSE: SHOP) got clobbered after releasing its earnings report on Wednesday.
The e-commerce software superstar posted solid first-quarter results, but its guidance for the second quarter was a bit light of what Wall Street expected, and investors responded by doing what they do to growth stocks that miss expectations. The stock plunged roughly 20%.
However, one Wall Street firm reaffirmed its bullish view on the stock even after the disappointing guidance.
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Oppenheimer bets on Shopify
In an analyst note on Wednesday afternoon, Oppenheimer reaffirmed its outperform rating on Shopify and its price target of roughly $90, implying an upside of roughly 45% from Thursday's prices.
The analyst commented that the business' fundamentals remain intact, essentially saying that the sell-off was overdone and happened because the company came up short of elevated investor expectations, even though it beat headline estimates.
Can Shopify get back to $90?
With the post-earnings sell-off, Shopify is now down roughly a third from its peak ahead of its fourth-quarter earnings report in February. Back-to-back earnings sell-offs isn't a great look for the fast-growing e-commerce stock, and its valuation comes with high expectations.
Even after Wednesday's decline, Shopify still trades at high price-to-sales ratio around 11, and the company has struggled to deliver consistent profits by generally accepted accounting principles (GAAP).
Shopify dominates its industry -- software for online retailers -- and continues to deliver strong top-line growth, but investors are eager to see that translate into meaningful results on the bottom line. After a steady rebound from its pandemic lows, the stock seems to have exhausted its upside potential without significant profits.
In order for the stock to get back to $90, Shopify will have to deliver on the bottom line.
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Jeremy Bowman has positions in Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.
