Shopify, Inc. (SHOP) has seen upward momentum primarily so far in 2020, steadily outperforming the S&P 500 and rising by approximately 130.9% over the past six months, in stark comparison to the S&P 500’s loss of about 4.6%.
However, despite the stock’s continued rise, hedge funds were selling the equity in the first quarter. This e-commerce company consequentially saw a drop in its ranking on the WhaleWisdom Heatmap.
Hedge Funds Are Selling
Hedge funds were selling the stock in the first quarter, and Shopify fell to 39 from a prior ranking of 14 on the WhaleWisdom Heatmap. Of hedge funds, 30 created new positions, 37 added to existing stakes, 15 exited, and 57 reduced their holdings.
Shopify has been fortunate to see strong price growth in recent months. Still, the company is not immune to the uncertainty of the coronavirus pandemic and its impact on the stock market, which is likely to play a part in hedge funds’ actions. During the quarter, the aggregate 13F shares held by hedge funds decreased to approximately 27.5 million from 29.8 million, a drop of about 7.7%. Institutions had a slightly more favorable view of Shopify, increasing their aggregate holdings by about 0.6%, to approximately 71.1 million from 70.7 million.
Analysts’ Estimates Are Encouraging
Analysts’ consensus estimates for Shopify show overall faith in the long term outlook. Piper Sandler Companies lifted Shopify to an Overweight rating from Neutral, citing that the digital business is well-positioned for the future. Piper also noted that digital commerce penetration rates could double or triple post-pandemic. RBC Capital Markets has maintained its outperform rating and given the stock a price target of $1,000. While ratings vary among analysts, strong cases made by analysts such as Piper and RBC offer compelling reasons for the equity to rise further.
While 2020 started reasonably well for Shopify, it is understandable why some hedge funds have sold. However, despite the turmoil and uncertainty brought along by the coronavirus pandemic, it is clear that many companies like Shopify have shown growth over the past few months. Weathering the pandemic is no easy feat, but Shopify appears to be thriving, at least in part due to its ability to recognize and adapt to changing consumer needs. It makes the company well-positioned to continue to benefit from the demand for digital e-commerce during and after the coronavirus pandemic.