Shopify Shares Plunge Nearly 8% Tuesday as ARK Trims Stake

Shopify Inc. shares fell nearly 8% on Tuesday as investors pulled back from high-valuation growth stocks. The decline came despite strength in broader tech shares.

The Nasdaq rose 0.12%, while the S&P 500 fell 0.36%. Meanwhile, the technology sector gained 0.64%.

Shopify's decline appears more company-specific than part of a broader tech sell-off.

Market breadth remained weak, with an advance/decline ratio of 0.6. Seven of 11 sectors declined. However, technology ranked third in sector gains.

Energy led with a 1.19% gain, while utilities rose 1.07%. This sector rotation may add pressure on high-valuation growth stocks.

ARK Invest Trims Shopify Stake

Cathie Wood's ARK Invest took profits recently after Shopify surged over 25% in August, with shares breaking above $158.

On September 2, ARK sold 40,392 Shopify shares. The ARK Innovation ETF sold 35,322 shares. The ARK Next Generation Internet ETF sold another 5,070 shares.

These sales followed Shopify's sharp August rally, providing context for recent profit-taking.

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Strong Financial Performance

Shopify's core business continues to deliver robust growth. Second-quarter revenue rose 34% year-over-year to $3.58 billion.

These results provide fundamental support for Tuesday's sell-off. However, Shopify's high valuation may make its shares more sensitive to shifts in investor risk appetite.

Technical Analysis

Shopify's long-term trend remains intact, but short-term technicals have weakened.

The stock currently sits 2.2% above its 200-day simple moving average of $131.27 and 8.2% above its 100-day simple moving average of $123.96. However, shares are 9.6% below the 20-day simple moving average of $148.48 and roughly flat versus the 50-day simple moving average of $134.50.

Momentum has also cooled. The MACD indicator sits below its signal line, with a negative histogram.

Shopify formed a golden cross in August when its 50-day simple moving average crossed above the 200-day simple moving average. Despite that, Tuesday's decline puts the 50-day average in focus.

Key resistance sits near $159, with support around $110.50.

Analyst Outlook

Shopify trades at a price-to-earnings ratio of roughly 98x, reflecting its valuation premium. The stock carries a consensus buy rating with an average price target of $167.38.

Rosenblatt initiated coverage on August 20 with a buy rating and a $175 target. Wells Fargo maintained an overweight rating on August 7 and raised its target to $180. Canaccord Genuity maintained a buy rating on August 6 and raised its target to $180.

Edge Score

The Edge scorecard gives Shopify a momentum score of 67.37, a growth score of 71.38, and a value score of 8.37.

These readings indicate solid growth and moderate momentum. However, the weak value score highlights Shopify's valuation premium.

Major ETF Holdings

Shopify holds a 3.48% weight in the Baron Technology ETF. It carries a 2.32% weight in the WisdomTree Global ex-US Quality Growth Fund and a 0.58% weight in the ProShares Ultra QQQ Equal Weight ETF.

SHOP Price Action

As of Tuesday's writing, Shopify shares were down 7.67% at $133.96.