Shopify, a ubiquitous e-commerce platform, had humble beginnings back in 2004. Its co-founders sought to create an online store to sell snowboards but were dissatisfied with existing e-commerce solutions. Consequently, Shopify was born in 2006. Fast forward to 2021, and the company boasted a remarkable $4.6 billion in revenue.
As 2022 dawned, Shopify’s share price had soared to over $1,300 per share, prompting concerns about accessibility for average investors. To address this issue, Shopify announced its first-ever stock split, a 10-for-1 split, on April 11. This move aimed to make shares more affordable, with each shareholder receiving ten times the number of shares at approximately 10% of the pre-split share value.
On June 29, the stock split became official. However, by this time, Shopify’s shares had already experienced a significant decline, partly due to the broader tech stock downturn and the challenges faced by the e-commerce sector.
On June 28, Shopify’s shares closed at $350.30. When the market opened on June 29, the stock was trading at $34.40, albeit with shareholders holding ten times more shares than the previous day.
As of September 9, Shopify’s stock was priced at $34.81 per share, showing only a modest increase from its immediate post-split value. Contrary to the typical post-split price bump, Shopify did not experience this trend. However, this doesn’t necessarily mean it should be overlooked as an investment.
According to Yahoo Finance, Shopify holds a slightly positive analyst recommendation rating of 2.9 (on a scale of 1 to 5, with 1 being a strong buy and 5 being a sell). Of the 45 analysts covering the company in August, 11 rated it as a strong buy, 10 as a buy, 22 recommended holding the stock, one considered it an underperformer, and just one suggested selling.
Shopify’s management is aware of the need for change and has made strategic decisions to steer the company back on track. Following a 10% workforce reduction in July, the company appointed a new Chief Financial Officer and Chief Operating Officer in early September. Jeff Hoffmeister, who led Shopify’s IPO at Morgan Stanley, assumed the role of CFO, while Kaz Nejatian was promoted to COO from his previous position as Vice President of Product. During the second-quarter earnings report, Shopify acknowledged 2022 as a transition year, with anticipated losses in the remaining two quarters, partly attributed to the acquisition of fulfillment provider Deliverr for $2.1 billion.
The decision to invest in Shopify stock depends on several factors. Firstly, it should align with your existing portfolio without skewing your asset allocation significantly. If your portfolio already leans heavily toward the tech sector, you may want to exercise caution.
Consider your investment horizon as well. Shopify’s own outlook indicates potential losses in the coming quarters, making it a medium- to long-term investment choice. E-commerce, however, remains a growing industry, and Shopify continues to evolve into an end-to-end e-commerce solution for small businesses, suggesting that its recent challenges may be a temporary setback rather than a sign of decline.
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