Upbeat Despite Consensus Miss
Whatever happens to the economy in the next year or two, the ubiquity and appeal of online shopping are not about to go away.
This presents a tremendous opportunity for Shopify, whose platform powers around 20% of all live e-commerce sites worldwide, and 28% of e-commerce sites in the United States.
While its true investor opinion toward growth companies has shifted in recent months, many have shied away from Shopify due to fears about how a potential recession and subsequent fall in consumer spending could harm its business.
This cautionary and risk-off sentiment of the market has caused SHOP’s stock price to be 70% off from its highs.
This could be a bargain opportunity to SHOP! (bad pun, sorry)
Shopify, like many growth-oriented firms, has been unprofitable in recent quarters due to a mix of aggressive investments in its growth plan, stock-based remuneration, and decreases in equity investments.
Despite these concerns, SHOP has rocketed upwards in 2023, up more than 20% YTD.
At the same time, Shopify has established a formidable business in a very competitive market over the years, and that edge has not been lost, even as growth has slowed from its above-average pandemic performance in recent quarters.
Even in a less-than-ideal environment for growth stocks, exceptional companies with real, long-lasting tailwinds can still present compelling buying opportunities for investors who are focused on long-term investing horizons.
So, is now the time to SHOP for Shopify? (another pun intended) Read further to find out!
Related Article To Read: Airbnb’s Global Expansion: Diversifying into New Markets
Flash Sale for Shopify Not Gonna Last Long
With the post-pandemic hangover almost at an end, the e-commerce sector is still anticipated to have many more years of growth, and Shopify continues to hold a prominent place in it.
In Q3, the platform processed about $50 billion worth of item volume, and merchants are increasingly choosing ancillary services like integrated point-of-sale hardware and payment processing.
Also, the losses may soon come to an end. Shopify has started making cost reductions, as the management rightly anticipates that the demand boom brought on by the epidemic wouldn’t last forever. Even so, gross profit still appears to be significant with over 50% of sales.
The business model for Shopify is that the more money customers spend on the stores owned by Shopify’s clients, which accounted for around 73% of the company’s revenue in Q3, the more money Shopify makes.
Once the fears of a recession have subsided, optimism has returned to many stocks, particularly those that depend heavily on discretionary spending, which includes Shopify.
With the market starting to look up, this might just be your last chance to buy Shopify, while its on sale!
Even the Charts Say SHOP NOW!
Sorry for another bad pun, but the recent price action for Shopify is also very compelling.
For most of 2022, SHOP has been trading between $42 and $25, with the key $42 resistance finally being broken this year.
After initially shooting up towards the $55 area following the breakout, a bad earnings guidance last week sent the price back towards the $42 level, which is now acting as support.
While Shopify may not immediately shoot back up toward the $55 resistance, this level should turn out to be sturdy, while it waits for both the RSI and MACD indicators to turn bullish again.
So for those looking to enter SHOP, you’ve just been given a fantastic entry point!
But What Could Send Shopify to the Surplus Store?
Since peaking in late 2021, SHOP’s share price has plunged 70%. This decline has been caused by a mix of sluggish growth and poor guidance, both of which may be attributed to the challenging economic environment.
To put things in perspective, the stock has never dropped this dramatically at any time since Shopify went public in 2015.
Investors clearly have good reason to be cautious. In the last year, Shopify’s sales growth slowed to 25%, a remarkable drop from the 71% revenue growth in the year prior.
Moreover, the company reported negative free cash flow of $200 million, a sharp decline from the $458 million in positive free cash flow recorded in the prior year.
Investors who are more conservative may wish to hold out until there are clear indications that Shopify has stopped generating substantial net losses but that hesitation may cost you more in terms of a missed opportunity.
Related Article To Read: Here’s a List of Energy Stocks That Will Never Go Out of Style!
Act Fast, This Could Be an Opportunity of a Lifetime!
With around one-fifth of all e-commerce sites on the planet built using its software, Shopify continues to hold the top market share for global e-commerce solutions.
This value, along with the company’s ongoing service expansion for retailers, can support long-term growth for the company and its stockholders in the years to come.
High inflation and unfavorable foreign exchange rates did hurt the company, but these are only short-term problems, and should not affect the long-term investment thesis.
This could be an indicator that investors have been given a once-in-a-generation chance to buy a company like Shopify, during the recent downturn.
Shopify is already the most popular supplier of e-commerce, and is second only to Amazon, in terms of online retail sales in the United States and with its ambitious growth plan, it might just help it gain position in a market with a rapidly expanding multi-trillion dollar value, even possibly pushing Shopify in the next decade or two into a $1 trillion company!
Act fast, this flash sale won’t last long!
For More Stocks And Investment Related News, Click Here.
