KEY POINTS

  • An analyst predicts that the e-commerce company will experience slowing growth.
  • Given the current state of affairs, that’s not too surprising.
  • Those investing for the long term should remain patient.

What’s going on with Shopify stock

Shopify stock tanked on Monday morning, dropping by 6.5%. As of the stock market’s close, shares of Shopify (NYSE:SHOP) were still down 3.36%.

A Wall Street analyst’s bearish commentary sent the e-commerce purveyor lower.

Why we care

Despite lowering his price target on Shopify stock from $50 to $45, Josh Beck of KeyBanc kept his overweight (buy) rating on the company, as noted by The Fly. So even with the revised price target, there is still potential for investors to see gains of over 51% compared to Friday’s closing price.

The analyst evaluated several proxies for Shopify’s gross merchandise volume (GMV) and gross payment volume (GPV). In doing so, he discovered that business slowed from 11% year-over-year revenue growth in the second quarter to 10% in the third quarter.

While the news wasn’t positive overall, there were some bright spots. For example, merchant-related data increased by 30%, and downloads increased by 3%.

What now

Shopify’s growth is potentially significant, but we won’t know for sure until the company announces its figures. Also, it wouldn’t be unexpected if the growth rate slowed, considering the current unfavourable economic conditions.

Because analysts must always be thinking ahead, they tend to focus on a much shorter time frame than long-term investors. They look out just three to six months rather than the three to five years investors might think about.

Shopify is projecting GMV growth that will surpass the general retail market for the next few years, starting in the back half of this year. Additionally, analysts estimate that e-commerce sales will increase from $5.7 trillion to $8.1 trillion between 2022 and 2026.

Shopify is a company that will grow significantly over time, and it is in a position to take advantage of much of the future growth in e-commerce. Investors who buy now will be rewarded for their patience.

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