Shares of growth stock and e-commerce giant Shopify (SHOP 3.08%) slipped lower for a fourth straight day on Monday, falling 4.2% as of 1 p.m. ET. Investment bank Goldman Sachs initiated coverage of Shopify this morning with a mixed review.
Goldman gave the stock a $1,570 price target. But the bank couldn't quite bring itself to recommend buying Shopify even at today's price of $1,400, giving it only a neutral rating.
"We see Shopify as well positioned for the long term," Goldman said in a note covered by StreetInsider.com, saying the company has one of the largest total addressable markets in growth software, "and several avenues for platform expansion." Yet even so, Goldman said that in the near term, it will take two to three quarters before growth in gross merchandise volume reaccelerates.
The reason: Locked-down consumers bought so much stuff during the pandemic over the past couple of years that their purchases were pulled forward, and this could depress sales of physical goods for much of 2022.
Goldman expects that Shopify will use this period of slowing shopping to invest to reinforce its platform, including improved fulfillment of customer orders. This should be good for Shopify in the long term, as it could make the company's software offerings superior to alternative providers. Still, Goldman said the "elevated investment" necessary for these improvements is likely to raise costs at a time of diminished revenue.
In Goldman's view, this means Shopify stock could be "range bound" for much of 2022, limiting near-term potential for gains in the stock price. Granted, if you look at the situation just a bit differently, this implies that 2022 could be a great time to buy Shopify at decent prices before it breaks out of this range in future years.
With Shopify stock continuing to trade lower today, however, investors don't seem too keen on looking at things differently.