Shopify (NYSE: SHOP) stock price made a bullish breakout this week and surged to the highest level since April last year. The shares have surged by more than 97% this year and by 118% in the past 12 months. In all, the stock has soared by over 190% from the lowest level in 2022, making it one of the best-performing technology companies.

Is this rally sustainable?

Shopify is a leading company that provides technology solutions around the world. It is a SAAS company that makes it possible for any retailer to create e-commerce solutions. The company makes money by charging a subscription fee from most people who sell in the platform.

It also makes it money by taking a small transaction cost from all sales. Also, Shopify has other ways of generating income, including advertising and payment processing. This makes it a major e-commerce company internationally. For example, its Gross Merchandise Value (GMV) was over $50 billion in the first quarter.

Shopify’s business has been growing. Its revenue jumped by 23% in Q1 to over $1.5 billion. Its closely-watched attach rate rose to 3.04%. Merchant revenue came in at over $1.1 billion while its monthly recurring revenue rose to $116 million.

Shopify has also moved to tweak its business operations in a bid to create value to shareholders. It recently sold its logistics business as it sought to simplify its business operations. The company is also investing in artificial intelligence.

Still, the concerns is that Shopify stock is not cheap. The company has a market cap of more than $84 billion and annual revenue of almost $6 billion. This means that it is trading at 14x sales, which is higher than most companies. Its 2022 net loss was over $1.9 billion.

Analysts expect that the company’s revenue will reach $6.78 billion this year and rise to $37.40 billion by 2032. This means that it is trading at 2.27x the estimated 2032 revenue, which is highly expensive.

Shopify stock price forecast

While Shopify stock price is severely overvalued, it does not make it a good company to short. Like Tesla, Shopify has always been an overvalued stock. The daily chart shows that it has been in a relentless rally in the past few months.

It has moved above all moving averages and the important resistance level at $67.10, the highest point in June. Therefore, by moving above this resistance, there is a likelihood that the shares will continue soaring as buyers target the next resistance at $78.82 (March 18 high).

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