Shopify Inc. (SHOP) shares rose more than 2% during Thursday's session after Jefferies upgraded the stock to Buy with a $1,250 price target.

Key Takeaways

  • Shopify shares moved off of their reaction lows during Thursday's session after Jefferies upgraded the stock to Buy with a $1,250 price target.
  • The move comes about a month after the company reported strong third quarter financial results that included a 109% jump in gross merchandise volume.
  • The stock could break out from trendline resistance and its 50-day moving average toward the upper end of its price channel over the coming sessions.

Analyst Samad Samana has greater appreciation for Shopify's ability to deliver robust growth over the next several years and reach $10 billion in revenue by 2025. Samana believes that growth will be driven by a structural pull-forward in e-commerce activity and better monetization of gross merchandise volume, adding that the stock could gain 20% from its 2020 highs.

The move comes after the e-commerce platform reported strong third quarter financial results. Gross merchandise volume rose 109% to $30.9 billion, which exceeded analyst expectations of just $27.5 billion. Subscription revenue rose 48% to $245.3 million, merchant revenue rose 132% to $522.1 million, and monthly recurring revenue jumped 47% to $74.4 million.

SHOP Chart

From a technical standpoint, Shopify stock rebounded from its reaction lows and trendline support toward the middle of its price channel. The relative strength index (RSI) remains neutral with a reading of 48.20, while the moving average convergence divergence (MACD) could see a near-term crossover following a bearish downtrend. These indicators suggest that the stock has more room to run.

A price channel appears on a chart when a security's price becomes bounded between two parallel lines. Depending on the direction of the trend, the channel may be termed horizontal, ascending, or descending.

Traders should watch for a breakout from trendline resistance the 50-day moving average at $988.77 toward the upper end of Shopify's price channel. If the stock breaks out from those levels, traders could see a move to fresh all-time highs. If the stock breaks down from trendline support, traders could see a move toward the 200-day moving average at $801.84, although that seems less likely to occur.

The Bottom Line

Shopify shares moved higher during Thursday's session after Jefferies upgraded the stock to Buy, saying that there could be a long-term move higher. With technical indicators suggesting that there's more room to run higher, traders should watch for Shopify stock to break out from trendline resistance toward the upper end of its price channel over the coming sessions.

The author holds no position in the stock(s) mentioned except through passively managed index funds.