Is Shopify stock a buy as it joins MSFT and ORCL in the merchants ERP market?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 14, 2021
  • Shopify shares edged higher by 1% on Thursday after teaming up with Microsoft and Oracle to offer ERP tools.
  • The company wants to give merchants more tools to manage finances and inventory on its online marketplace.
  • They will gain access to ERP tools including Microsoft Dynamics 365 Business Central and Oracle NetSuite.

On Thursday, Shopify Inc. (NYSE:SHOP) shares edged higher by 1% after announcing a strategic partnership with Microsoft Corporation (NASDAQ:MSFT) and Oracle Corporation (NYSE:ORCL). The company is teaming up with the two enterprise software giants to offer ERP tools to merchants on its online marketplace.

Shopify wants businesses to manage inventory and track finances within the platform by giving them access to Microsoft Dynamics 365 Business Central, Oracle NetSuite, Infor, and others through the Shopify app.

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As a result, businesses will no longer need to use third-party apps to connect with external ERP tools. The partnership will allow businesses to save time and money while selling their products.

Shopify shares are up nearly 30% this year after recovering from the February-may plunge.

Time to bet on SHOP’s growth prospects?

From an investment perspective, Shopify shares trade at steep trailing 12-month P/E and forward P/E ratios of 72.25 and 217.57, respectively, making the stock less attractive to value investors.

However, the company offers exciting growth prospects to investors willing to overlook the short-term turbulence. Analysts expect its earnings per share to skyrocket by a whopping 334% this year, before rising at an average annual rate of nearly 31% over the next five years.

Therefore, growth investors could find the stock as an exciting option for their portfolios.

Source – TradingView

Technically, Shopify shares appear to have recently spiked to complete an upward breakout from a descending channel formation. However, the stock is far from reaching overbought conditions, thus leaving room for more upward movement.

Therefore, investors could target extended gains at about $1,469, or higher at $1,520, while $1,357 and $1,309 are crucial support zones.

There is time to buy SHOP shares

In summary, although Shopify shares have rallied nearly 30% this year pushing its valuation multiples higher, the stock is yet to reach overbought conditions after a recent rebound. 

Therefore, with analysts forecasting exciting growth prospects for the online marketplace, it could be time to invest in SHOP shares.

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