E-commerce platform Shopify is offering more tempting prices for investors in search of a good deal. Shares are down 7.50% this week and hitting stock levels last seen in May 2020. But unless you like being miserable with plenty of company, SHOP stock is no bargain.
If the usual headline threats of inflation and rising interest rates, consumers at risk, Covid-19 and Russia weren’t enough, now even other problems are hanging over shares of SHOP. While Shopify isn’t set to report until mid-May, Netflix’s dreadful report helped spark a sell-off in SHOP stock Wednesday on the grounds, growth stocks at large, are at risk.
And the sellers, rather than the shoppers in SHOP stock may in fact be on the right side of transaction. Today let’s examine what else is happening to Shopify, both off and on the price chart, and why a cheaper share price isn’t the same thing as value.
Bears Warn It’s Not Just a Netflix Story
As much as NFLX’s fallout has rattled a higher multiple growth stock like SHOP, it’s far from the first shot over the bow for Shopify. Shares of course have taken it on the chin the past six months in sympathy with a broader push out of growth stocks and whose valuations can suffer more easily in a rising interest rate environment like today’s.
But SHOP stock’s swifter falling out with investors which helped sink shares in excess of 70% from their November all-time-high of $1762.92 also has all but gone, benefits of Covid-related lockdowns and restrictions weighing on shares. Not that Netflix isn’t similar in that respect, but they’re not exactly two peas in a pod.
Bears may also be looking at Alphabet’s recent launch of its Last Mile Fleet Solution. The service is layered on top of its On-demand Rides & Deliveries solution on Google Maps and it’s a potential threat to SHOP stock’s small-to-mid-sized retail customers within its Shopify Fulfillment Network.
Also and other than relative cheapness, there’s little value buying a stock that’s out-of-favor with momentum investors and whose still-lofty price multiples keep it in the company of Snowflake rather than IBM , and removed from the clutches of more fragile investors.
Smarter Shopping in SHOP Stock
If you haven’t guessed, staying on the sidelines looks very appropriate right now in SHOP stock. Shopify shares are stuck in a risk-averse market environment that’s not going to satisfy bullish momentum investors or worthy of a rescue by value-types.
The good news and longer-term, as Shopify makes its way lower, the chance for a solid return on investment and who knows, even another ten-bagger, increases. For now and the way stocks of SHOP’s caliber are trading, it’s better to be late than early though.
In my estimation, a full-blown challenge of Shopify’s pandemic bear market low in March 2020 is increasingly possible. But if that seems alarmist, I’d at least warn bulls fighting a vicious trend to seek protection with an actively-managed collar on SHOP stock and so you can continue to shop for better value later.
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