Shopify (SHOP) - Bullish Flag Breakout Higher

Merchants can design, set up and manage their shops using a single interface which make is an easy and attractive way to start up a business in few clicks.

E-commerce industry been around for almost 3 decades, but the recent 10 years saw a significant growth and with new technologies it took it to the next level which has transformed the processes of buying and selling goods.

Shopify (SHOP) has been in business for 14 years and become one of the leaders in providing e-commerce services. The company has not taken on any debt in the past 5 years and has sufficient cash runway for more than 3 years if free cash flow continues to grow at historical rates of 47.1% each year.

Shopify Future Revenue and Net Income

 

SHOPIFY Future Revenue and Net Income.

 

Based on the the current data for Shopify, its earnings and revenue are expected to grow significantly at over 20% yearly putting a solid case for investors to keep it for the future. Its stock yearly return outperformed the Information Technology sector and the US Market since the IPO.

Let's now switch to the technical aspect of SHOP chart with the guidance of  Elliott Wave Theory to understand the future path:

Shopify Weekly Elliott Wave Chart

Shopify SHOP Weekly Chart 02.10.2019

 

Since IPO, the stock price advanced higher in a classical 5 waves move which design a bullish trend. Therefore, based on the Elliott wave theory, the stock will do another similar 5 waves move in the same direction after a 3 , 7 or 11 swings pullback against the trend.

That's exactly what's taking place, SHOP ended the cycle last year as a first leg wave (I) then corrected lower in what appears to be a bullish flag pattern in wave (II) and now the stock is in the process of resuming the main trend by making new all time highs.

The break to the upside is significant in two ways: A break of a bullish continuation pattern and more importantly a possible start of a third wave higher which represent the strongest wave in the Elliott wave theory. The minimum measured target for the move is at the 100% Fibonacci extension $275 and the 161.8% comes at $375.

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