Why did Shopify stock go down today? The high growth rate is fading

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Shopify (SHOP -5.6%) fell sharply on Tuesday and traded at a new 52-week low of $523.02 before recovering a bit.

Shares of Shopify (NYSE:SHOP) took a turn even lower after the e-commerce company's Q4 earnings report disappointed last month and led to a round of price target cuts across Wall Street.

The jittery trading on Shopify (SHOP) is tied to concerns that the COVID-triggered acceleration of e-commerce that spilled into the first half of 2021 will be absent from 2022, which will make the growth comparisons tougher and lead to a pullback on valuation multiples. There is also growing caution on the impact of inflation on SHOP this year.

The Seeking Alpha Quant Rating on Shopify (SHOP) flipped to Strong Sell on February 22.

Comments

[Rondayvous]

Wow, talk about bad timing. Write about a stock getting crushed only to have it rebound $72 (over 14%) the next day. Guess they were waiting for this article as a Buy Buy signal.

[Tall Seller]

“Why did Shopify stock go UP today? The high growth rate could SURGE.”

[yajkr]

I think its time for me to admit it that while it remains a fantastic business it was overvalued over $1000. I regret not selling because I thought it would grow into it. I have held SHOP shares since 2018 and my lowest tranche was at $139. I have lost close to 50k in pure profits so trust me, the pain is real. I think the "fair value" for innovative companies is always going to baffle the value players but if Tobi is going to enter into a highly capital intense business, I dont see him overtaking amazon.

Amazon is not going anyhwere as long as AWS continues to be part of amazon. AWS has such a massive lead on cloud that for the forseeable future that business is going to continue to grow like a weed. Unless they shoot themselves in the foot which they are more than capable of doing with their miserable working conditions and treating everyone who is not a customer like shit, they will be hard to dislodge as the undisputed leader of ecomm. Still room for plenty of players.

[Chaffey]

@yajkr Well I'm no expert and I don't expect Shop to go up to former valuations. But Tobi is hard working and innovative. I can guarantee he is working to restore the faith of investors. Tobi is a programmer. That's his gift so he is hands on and knows the business. If the market shifts he'll shift. We are seeing some of that confidence in his business model today . Up almost 10% in a half an hour after opening. The business is properly valued right now and with hard work we will see some improvement.
It has been hard for every investor over the last months and a lot of people have been hurt. Let's hope we've seen the bottom.

[Tall Seller]

Amazon is turning into another boring capital heavy logistics company and they are extremely antiquated for where new generations of customers prefer to shop.

[User 48109984]

@Tall Seller
Amazon is chock full of flesh-eating woke Piranhas.

[unan2010]

Forward PE is now ~150x. Come on guys this baby is ON SALE !!!!!!!!!!!!!!!.

[tommyfmu]

Pulled this from Goldman's model today for those who say Shopify has no profits: eps for '22 '23 '24 :: $6.43 $8.51 $11.20 , the forward pe sits at about 80x 61x 46x , respectfully. Per co guide, Q1 slowest due to comps, but it's a 2H reacceleration that might turn the trend around as comps get easier, pending global developments and consumer discretionary spend.

[unan2010]

@tommyfmu well you should probably take the consensus EPS and not just goldman.... just saying...

[Doctor E]

Tech stocks are crashing yo.

[Purewater]

What is the attraction to this company? After all these years all they can produce is $200mm in OCF inclusive of SBC on a $65b valuation. Garbage.

[Ice_Kold]

@Purewater That's what I thought, but time and again they continue to grow rapidly. I'm surprised, they impressed me.

[SomeGuy14]

Watching these bubbles collapse in dot com 2.0 is truly amazing. It’s so similar to 2000. Boy, memories are short.

This is just beginning. Lots more to come.

[Tdog88]

@SomeGuy14 let’s re-visit this in 4x weeks. Curios what “lots more to come” means. The S&P is 5% from the bottom.

[InvestorMan Sr.]

@Tdog88 In 4 weeks SHOP will be lower. It's not even close to its bottom.

Look at ROKU. That one too.

[raining2009]

@SomeGuy14 After 1999 dot com bubble, AMZN, GOOG, AAPL, NVDA then go ahead to rise hundreds of times? If you select the correct companies, the valuation doesn't matter. Valuation only matters if you pick the wrong companies.

[ckarabin]

It's a rare, very rare occurrence when a company's stock is worth 900x earnings as Shopify was back in November. Such an absurd valuation level is almost never sustainable. They only made $2 pe share in 2021 and when they start writing down the mark to market marketable equity that makes up nearly half their balance sheet, they will be lucky to break even in 2023.

[Taurus Eternal]

@ckarabin it's not rare at all. every company in existence crossed the threshold of non-profitability -> profitability at some point. at that threshold, their P/E will seem ridiculously high. i dont get why this is so hard to understand? as they scale and mature (less reinvestment), their profits will increase

[ckarabin]

@Taurus Eternal Even the earnings forecast for 3 years out was a 600x valuation when the stock was at $1900. SMall wonder it crashed. Reality is that it DID crash. So the PE was far too high

[dh110713]

The best way to make $$ with SHOP is to buy 100+ shares and keep selling covered calls with expiration 2 or 3 weeks in the future and a strike of around $300 more its current price.

At this time I do not expect the price of SHOP to rise substantially this year but I do think it will bottom out around $500 and then show some steady growth and probably double to $1,000 or more in 3 years.

[chmarpio]

@dh110713 this is what I did. 100 shares for my teenage kids in 5-7 years

[John P Wayne]

Love the negativity. Great if it drops more. I'm buying.

[yieldhunter196]

@John P Wayne this

[John P Wayne]

@yieldhunter196 Anyone know the seekingalpha commenter that tipped NINE 2 months ago? I've tried to look back through articles to find his comment. Anyway I bought it at 1.17 on the strength of his comment and it was up to 7.20 after hours yesterday. Whoever he is I want to thank him, and follow his comments.

[tarikur2]

I love the article says SHOP disappointed earning when it beat the estimates and grew 41% in revenue. The reason why it went down was because low future guidance.

[Tall Seller]

Funny too as their growth is likely to RE-accelerate at some point with all the huge growth drivers they keep adding.

[H0BB]

@Tall Seller great Company, but They need to grow Atleast 50% y/y to sushain this valuation, and I don’t see it happening in future.

[Tall Seller]

“2021: $4.6 billion
2020: $2.9 billion
2019: $1.6 billion
2018: $1.1 billion
2017: $673 million
2016: $389 million
2015: $205 million
2014: $105 million
2013: $50 million

2012: $24 million”

👉🏻 twitter.com/...

With all the HUGE growth drivers $SHOP keeps adding, I’ll happily agree to disagree.

[TheCoolCanadian]

Canada Curse!! I rode this rollercoaster, made gains, and then took losses hoping it could break it. Oh well... opened a new small position here at the pre-pandemic high, I expect to close it in the coming trading days if this continues to sink back to earth.

[Tall Seller]

If such a crude is true, then the USA has 100X bigger curse because that’s how many more big businesses have gone bankrupt and/or been smashed by antitrust.

[Tall Seller]

Interesting to get an update soon for how many of the 400,000,000 businesses & creators on Facebook are using and are going to use Shopify’s Shop Pay on Facebook Shops and Instagram Shops now that is turned on BY DEFAULT for ALL Facebook Shops and Instagram Shops users, as SEEN HERE:

• twitter.com/...

And, HERE:

• www.facebook.com/...

This could further cements Shopify’s dominance it the world of commerce and maybe even help RE-accelerate their growth. Right?

[Imnotupst]

literally cheaper valuation now than Coca Cola that grows at 4% a year and is buried in debt.

[MadisonAv]

@I'mNotUPST Then again, Coke is as solid as it gets, less likely to be disrupted than a technology company like Shopify. Investors pay for peace of mind. Disclosure: no position in SHOP or KO.

[rkw29]

Simple lesson. Good old fashioned valuation metrics do matter. Just admit you bought it on bubble momentum to make a quick buck and you will have my respect. However, to say it is “undervalued” like I have been hearing for the last couple years and you were just kidding yourself. May have a future and may “grow” into its previous valuations eventually, but will take a long long time especially if you bought at the high and can survive the margin calls.

[gutcheck]

dont like to say it ... but told ya

[Tall Seller]

It’s still 10X above when you first told us so.

[Tall Seller]

Wonder how many BILLIONS of transactions will happen with $SHOP & $AAPL soon rolling out Shop Pay tap-to-pay merchant solution on iPhones (seen here: www.apple.com/... ). That’s likely gonna result in a HUGE aggregation of new Shopify Shop Pay users and a HUGE differentiator for many more merchants to choose $SHOP.

[dankii]

@Tall Seller thx for the link!

[1winner]

@Tall Seller great company, stock heading about $200/share lower

[Tall Seller]

If it does, I’ll back up the truck. I have a whack of dry powder now for when $TQQQ hits $5-10, when $AMZN and other such companies holding up $QQQ likely eventually collapse soon.

[rutleyh]

Is this a better entry point than $1700? Sure. Still, it doesn’t mean SHOP is a great value yet. The macro environment for richly priced stocks is simply awful now and I don’t see it improving for a while. I am also concerned about the source of earnings for this firm. Are they an investment firm?

Hard to predict price action over the short run but I would still not bet that the price would go up.

[Imnotupst]

@rutleyh its not richly priced... Its cheaper than KO and growing 35% + sustained for the next half decade

[tarikur2]

Look Shop's P/E and P/S and it is highly undervalued.

[1winner]

@rutleyh agreed. It’s been 5x P/S in the past. Would put us at sub $250/share

[Tall Seller]

$SHOP is in the middle of rolling out a whole whack of solutions that expose their merchants and their Shop Pay to 3 BILLION daily users and hundreds of millions of merchants & creators. And have more coming and likely will add even more.

$SHOP growth is VERY LIKELY to RE-accelerate at some point in the not too distant near future.

[1winner]

@Tall Seller I’ve heard 5 times revenue is coming. I think that’s a $30B market cap….$240 PT…

[Tall Seller]

I heard $SQ decline has just begun. Careful.