- Shopify (STORE) the stock was overtaken by the slump in e-commerce stocks.
- Markets have conveniently forgotten the immense value of Shopify’s platform.
- Investors don’t appreciate the value of the Deliverr acquisition.
Despite the year-long collapse Shopify (NYSE:STORE), skeptical investors are unwilling to bet against the software e-commerce company. Short sellers know SHOP shares can stage a sizable rally at any time. In the current bear market conditions, fearful investors have relied on valuation concerns to justify avoiding Shopify stocks.
The lower prices fall, the more likely investors are to miss a potential opportunity. Markets are fickle. Its bearish sentiment leads to the decline of the title. Long-term investors can patiently wait for valuations to fall sufficiently. Eventually, Shopify is the first e-commerce stock to rise from the rubble.
Markets abandon e-commerce stocks
In the weeks following its quarterly earnings report, Amazon (NASDAQ:AMZN) failed to attract declining buyers. Based in Singapore Sea Limited (NYSE:SE) were also trading at yearly lows. The South Korean online retail giant coupang (NYSE:CPNG) is also in a downtrend, despite reasonably strong quarterly results.
Marketplaces incorrectly classify Shopify as an e-commerce business. The aforementioned businesses face increasingly weaker demand as disposable income declines. Inflation rates are likely to reach double digit percentages in the coming months.
Shopify isn’t afraid to invest in growth. It recently announced an acquisition of e-commerce fulfillment technology.
Acquisition of the delivery person
In the first quarter financial report, Shopify announced its intention to buy Deliverr, a fulfillment technology provider. It needs to strengthen its fulfillment and delivery operations now. Its customers need a back-end solution that rivals Amazon’s one-day delivery offering.
Shopify reported point of sale growth of around 80% year over year (YoY). To support its insatiable growth rates, Deliverr will ramp up its shipping capabilities. For years, Shopify needed to strengthen its end-to-end logistics network. Acquisition will get him there faster.
The company is boosting its appeal to merchants with Deliverr. They will have a better experience with superior software. Shopify will scale the solution, giving merchants more control over its logistics network.
SHOP Stock has manageable risks
Tech investors are concerned about the operational risks associated with large acquisitions. Shopify is on a mission to help local businesses thrive. To retain its base of local merchants, it needs a strong back-end network.
Shopify has spent a lot on acquiring talented engineers. Its development team will ensure that it adapts its operations to meet the limitless demand for e-commerce solutions to come.
Shopify’s stock performance in 2021 will pale in comparison to this year and beyond. Last year, it was one of many tech companies that benefited from bubbly markets. The Federal Reserve fueled the tech bubble. The government overheated the economy by issuing stimulus checks.
The high interest rate will continue to undermine Shopify’s premium valuation. The coming recession could weaken transaction volumes within a year. It’s a necessary headwind to slow the economy and weaken inflation.
SHOP Stock is it a buy or a sell?
Shopify is a speculative buy. The price/earnings ratio is still very high. If the stock falls further, investors will still pay a premium. Fortunately, no other competitor can offer such a good online shopping platform compared to Shopify.
Analysts aren’t giving up on Shopify’s outlook either. The average price target is around $612, according to Tipranks.
According to Stock Rover’s quantitative research report, Shopify shares offer investors good quality and a discount.
Stock Rover Report
SHOP stock has rarely offered investors an entry price at this level of value.
Growth investors should consider starting a small position in Shopify. Increase the position over the next few months. Avoid panic selling when stocks fall. Instead, establish a regular schedule for building a base position.
As of the date of publication, Chris Lau had (neither directly nor indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.