Shares of Shopify (NYSE: SHOP) (TSE: SHOP) have dropped more than 73% this year. Given the share price correction and the company’s future growth plans, the stock might be a good long-term investment opportunity now. Moreover, bullish signals from hedge funds help instill confidence in the stock.
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Can Shopify Stock Make a Comeback?
The consistent drop in Shopify’s share price has kept investors unsure of its long-term potential. Also, comparisons to the pandemic phase, when the e-commerce business had been booming, make things tougher.
Despite these struggles, management at Shopify continues to remain optimistic about its long-term potential. Indeed, the company has sought to make 2022 its year of investment instead of worrying about the tanking share price.
On this front, the company has been looking to bolster its fulfillment network. It acquired a logistics technology provider, Deliverr, in a $2.1 billion deal. Also, it is targeting expansion in the international markets through Shopify Markets, its cross-border commerce solutions product, which is likely to support topline growth.
Furthermore, the recently-reported quarter reflects strong growth potential. Shopify was able to increase its gross merchandise volume by 11% year-over-year, despite the high inflationary environment, which weighed on consumers’ pockets. Though the e-commerce giant reported a loss in Q3 due to several one-time items, revenue increased 17% year-over-year.
Hedge Funds and Investors are Buying SHOP Stock
According to TipRanks’ Hedge Fund Trading Activity tool, hedge fund managers have increased their holdings in SHOP stock by buying 8.5 million shares in the last quarter. The data is based on information from 20 hedge fund managers, including ARK Investment Management’s Catherine Wood, who has bulked up her holdings in the stock.
Is SHOP a Good Stock to Buy, According to Analysts?
Wall Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating. This is based on eight Buy and eight Hold recommendations. The average SHOP price target is $41.21, implying 12.63% upside potential.
The Takeaway
Investors are likely to see a significant price drop as an attractive entry point. Also, strong growth potential based on the company’s expansion plans makes a positive case for the stock. Additionally, the October data inflation seems to have eased a bit. However, it may still be soon to cheer up on the news.
