Shopify: A Beaten-Down Tech Stock With Massive Upside Potential
SHOP) is a Canada-based e-commerce giant that
provides merchants the tools to start and manage their online
businesses. It is an end-to-end service provider, and once
onboarded, a merchant can do everything from managing products and
inventory, accepting payments, processing orders, filling orders,
and shipping orders.
Over two million merchants use
Shopify’s platform. While Shopify stock thrived amid the ongoing
pandemic, it has lost over 77% in market value since touching
record highs in November 2021.
However, Shopify has an excellent
business model and has also played an essential role in shaping the
long-term prospects of the e-commerce segment. SHOP stock will
likely bounce back once again as inflation loses steam and the
upcoming recession abates.
Shopify is part of a rapidly expanding addressable
The pandemic accelerated demand
for the e-commerce sector, but online shopping still has a lot more
potential. According to an
IMARC forecast, the global e-commerce market might
increase at a CAGR of 27.4 % between 2022 and 2027, growing from
$13 trillion in 2021 to a massive $55.6 trillion by 2027 allowing
Shopify to likely to thrive in this market.
In the last few years, Shopify
has played a pivotal role in the evolution of the e-commerce
industry. Numerous manufacturers have benefited from the
companyU+02019s software-as-a-service (SaaS)-based
Shopify’s platform services
around 1.75 million US merchants in total, which equates to over
10% of online sales in the United States. Therefore, more merchants
will swarm to its portal as new opportunities materialize, and the
company concentrates further on
expanding its fulfillment
ecosystem by providing a two-day
shipping capacity to 90% of the US population.
Shopify’s weak financials in Q2
Shopify’s financial health has
been impacted because of the hindrances it has been facing since
the beginning of this year. Its sales had slowed down largely in Q1
of 2022 to $1.2 billion, an increase of 22% year-over-year.
Comparatively, sales in 2020 rose 86% year-over-year. In Q2,
sales growth decelerated further to 16%.
Alternatively, Shopify’s business
is much bigger now, and its first quarter’s revenue is comparable
with its 2019 revenue levels of $1.6 billion.
Great business strategies
Recently, Shopify has been trying
to reshape its operations to gain traction in international
markets. For instance, the company reached an agreement with the
China-based organization JD.com to make it easy for its merchants
in the USA to sell in China.
Further, it also acquired
Deliverr, a fulfillment technology provider, in order to
help the merchants on its platform to scale up their businesses
through their logistics platform. Notably, this acquisition was
said to more than double the size of ShopifyU+02019s fulfillment
The deal with JD.com will likely
provide the company with merchants who are actively engaged in
exports, while the acquisition of Deliverr would make the logistics
operations much better for the merchants in general.
Shopify is a top business, but
currently, its operations have been badly hurt. The recent changes
made by the company in its operations might pay off, allowing
Shopify to enhance its merchant reach. SHOP stock is currently
trading at $38, and the average target price is $79, which is a
potential upside of over 100%.
Historical Stock Chart
From Nov 2022 to Dec 2022
Historical Stock Chart
From Dec 2021 to Dec 2022