Why Shopify Shares Are Sliding Today

Shopify Inc SHOP shares are trading lower Thursday following a downgrade from Jefferies.

What Happened: Jefferies downgraded Shopify from Buy to Hold and announced a $40 price target, citing macro challenges and profitability concerns.

Jefferies expects Shopify to face gross merchandise volume headwinds this year. The company also has to ramp up capex, which will make it difficult for shares to gain momentum to the upside, the firm said.

"With the stock approaching our $40 PT, we are choosing to move to the sidelines," Jefferies analysts wrote in a new note to clients.

The analysts also see a long road ahead to operating profitability. Although management has signaled a willingness to shift its priorities in 2023, meaningful free cash flow generation is still a long way out, Jefferies said. 

"With SHOP transitioning to a solid, but not spectacular, growth story with limited margins, we see 2023 as a transition year for the company and the stock," Jefferies said.

See Also: Benzinga's Top Ratings Upgrades, Downgrades For January 5, 2023

SHOP Price Action: Shopify has a 52-week high of $119.78 and a 52-week low of $23.63.

The stock was down 4.09% at $36.01 at time of publication, according to Benzinga Pro.

Photo: Open Grid Scheduler from Flickr.