Shopify at $400: Is the Stock Still a Buy? - InvestingChannel

Shopify at $400: Is the Stock Still a Buy?

Shopify Inc (TSX:SHOP)(NYSE:SHOP) has been on a tear this year, up over 110% since January. On Thursday, the stock came within pennies of reaching the $400 mark and it raises an important question: should investors still be buying the stock at this price?

You’ll be hard-pressed to find any valuation metric that will tell you Shopify is a good buy at this price. With the company being nowhere near profitability and planning to not only expand its work force but get involved in television as well, it’s going to burn through even more cash in the coming years and profits may prove to be even more elusive.

And so buying the stock at $400 and a market cap of more than $44 billion, investors are paying a hefty premium for the stock. Its currently being valued around the size of major railway operator Canadian Pacific Railway (TSX:CP)(NYSE:CP) and the Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM). These are two very strong, established and profitable brands in Canada and putting Shopify alongside them doesn’t seem right.

Even though the stock may continue to rise, the higher it goes the greater there is a risk of it having a big sell-off later. Investors likely have their stop-losses ready to go and if a big investors pulls the trigger to sell, we could see a sharp decline happen very quickly.

Shopify’s stock has been very volatile over the years and a downturn in the markets or some negative press surrounding the company could be all that’s needed to send it into a tailspin.