Shopify Inc. (SHOP) shares fell more than 3% during Tuesday's session after Raymond James downgraded the stock from Outperform to Market Perform without a price target. Analyst Brian Peterson believes that near-term headwinds could create a more challenging narrative for the stock. He views last week's guidance withdrawal as an indication of slowing trends in March, with the potential for further pressure as the COVID-19 pandemic persists over the coming weeks and months.
On April 1, Shopify suggested that brick-and-mortar businesses were pivoting online as a way to combat declining foot traffic due to stay-at-home policies. The company also said that it suspended thousands of merchants for charging unfair prices or making false claims about COVID-19-related items, such as face masks and hand sanitizers.
Management expects that the momentum that built up in 2019 will extend into January and February 2020, resulting in revenue and adjusted operating income that is within or ahead of first quarter guidance. However, the company suspended its full-year guidance, citing the uncertainty surrounding the COVID-19 crisis, which suggests potentially slowing trends.
From a technical standpoint, the stock broke out from the 200-day moving average at around $375.00 earlier this week before giving up ground during Tuesday's session. The relative strength index (RSI) remains neutral with a reading of 45.28, while the moving average convergence divergence (MACD) is trending sideways. These indicators provide few hints into future price direction.
Traders should watch for a rebound from the 200-day moving average toward trendline resistance or the 50-day moving average at $446.80 over the coming sessions. If the stock continues to move lower, traders could see a move to lower trendline support near $350.00 in the coming days.
The author holds no position in the stock(s) mentioned except through passively managed index funds.