Shopify Hopes to Recover E-Commerce Dominance

Analysts are split on whether a rebound in Shopify Inc. (SHOP) can be maintained.  Shopify shares have tumbled +69% this year, and the average estimate of analysts is for the stock to gain only +2.2% next year.  That is the lowest expected return among this year’s ten worst-performing U.S. and Canadian tech companies with market values of $20 billion or more.

Shopify rallied sharply during the pandemic to a record high of $176.29 in November 2021.  However, the stock sank -87% to a 3-1/2 year low in October as the pandemic eased.   Defiance ETFs said, “Shopify suffered alongside other high-growth tech stocks over the past year.”  The company soared during the pandemic “around the idea that e-commerce was really the only commerce due to Covid.”

Shopify lets merchants set up online sales websites, manage inventory, and process payments, among other things.  Shopify’s current market value of C$57.6 billion ranks it the 14th largest company in Canada.  At its peak in November of 2021, Shopify was Canada’s biggest company, with a market value of C$268.7 billion. 

MoffettNathanson said during the pandemic, e-commerce sales took off, and “Shopify seized the opportunity and now powers 11% of all U.S. e-commerce.”  However, now that business is slowing, Shopify, like other big technology companies, is cutting jobs and reducing costs.  Shopify is forecast to lose $3.1 billion this year after having $2.9 billion of net income in 2021.

Stock market bulls are hoping Shopify, second only to Amazon.com (AMZN) in the still-growing e-commerce industry, can sustain a recovery.  Shopify rallied to a 4-month high last Friday and is up 90% since posting a 3-1/2 year low in October.  The company reported $7.5 billion in sales during the Black Friday/Cyber Monday weekend, a +19% increase from last year.  Third Bridge said, “Shopify is caught between having to decide whether to appease investors in the short term and cut costs or continue its aggressive growth strategy.” 

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