Will Santa deliver, or will the buck ram it down?CAPITALCOM:SHOP delivered a strong earnings report recently, key points being:
- Strong revenue growth of 26% YoY
- Improved free cash flow margin, up to 19% from 16%
- Operating income more than doubled YoY
On the flip side:
- High operational spending
- Increase in loan and transaction losses, indicating rising credit risk
- Macroeconomic risks
Heading into Christmas shopping, SHOP is well positioned. Spending this season is expected to rise 7% compared to 2023, and more people are buying early, leading to more consistent sales. Online shopping is expected to rise once again this year, benefiting SHOP.
Obstacles are higher prices, and the outlook of even higher prices to come. The economic plans of the president-elect will without a shed of doubt lead to rising inflation, and many will plan accordingly. However, I believe the upside is greater on the semi-short time, which will help push SHOP share price further. The gap following the earnings release was big, and we might see a pullback short term, so I would hold going long until that gap is resolved.
I don’t expect the gap to be filled, but a retrace must be expected. The most recent high above today’s price is from November 2021, so that is not relevant, so no target. There are no obvious support or resistance levels, as price has been pretty flat for ages. Watch for pullbacks, then do your own DD.
