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Shopify Lower on Plan for $1.55 Billion Stock Offering

Shopify plans a $1.55 billion stock sale to strengthen its balance sheet. Analysts are concerned that the stock may be overvalued.
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Shopify  (SHOP)  shares fell Tuesday after the Canadian e-commerce-management platform unveiled a US$1.55 billion share offering.

The offering is 1.18 million Class A shares at US$1,315 each. The underwriters also have an option on another 177,000 shares.

Shopify stock recently traded at $1,298.47, down 6%. 

Proceeds of the offering will strengthen the balance sheet, "providing flexibility to fund its growth strategies,” Shopify said in a statement.

But Shopify shares have more than doubled, up 150%, in the past year amid the pandemic-fueled boom in online shopping. 

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And a number of analysts have suggested the stock is overvalued.

Morningstar analyst Dan Romanoff likes the company but puts fair value at $697, which is 46% below its current level. 

“Shopify continues to benefit (way more than [Wall Street] anticipated) from lockdowns that have forced consumers online, which we see as an acceleration of a secular trend,” he wrote in a commentary last week.

“The Shopify Fulfillment Network is likely to gain significant traction with customers and should help drive strong growth over the next decade in our view. We also see room for further penetration in payments, shipping, and capital.”

Further, “Based on [earnings] results, management commentary, and an annual model roll, we raised our growth assumptions throughout our model, but continue to wrestle with valuation,” Romanoff said. 

“We are raising our fair value estimate to US$697 per share from US$496. ... With the shares trading near US$1,400, we still see [the] shares as overvalued.”