Shopify Stock May be a Bargain at These Levels
E-commerce infrastructure platform Shopify (NYSE: SHOP) stock has crumbled a whopping (-77%) in 2022. The popular commerce platform paves the way for digital transformation by enabling small businesses to set...
E-commerce infrastructure platform Shopify (NYSE: SHOP) stock has crumbled a whopping (-77%) in 2022. The popular commerce platform paves the way for digital transformation by enabling small businesses to set up shop online quickly and efficiently. It also enables them to not just start a business online, but effectively market, finance, and manage the business. Its platform can handle the logistics and payment processing for a full circle one-stop scalable e-commerce operations solution. The stock had a meteoric rise to $176.29 post-split during the pandemic lockdowns as consumer flocked to online shopping due lockdowns. Unfortunately, shares came crashing down as the pandemic dissipates and shoppers return to brick and mortar stores during the great reopening. With inflationary pressures, supply chain disruption and rising interest rates, small businesses are feeling the pinch, which is the majority of Shopify's client base. A recession would impact Shopify's largely small business client base the hardest both in terms of the subscription revenues and its Merchant Network revenues as consumer spending would tighten. The collapsing share price not only hurts investors but its employees and future talent. The Company was expected to give workers the choice of receiving cash and/or stock for salary compensation in the summer. However, the compensation overhaul was announced to be delayed until at least September. The continued falling share price would go the opposite way in improving employee morale. It also poses an issue of dilution for investors, which could further depress the shares. Prudent investors seeking exposure in a leading e-commerce infrastructure play can watch for opportunistic pullbacks in shares of Shopify.
Fiscal Q1 2022 Earnings Report
Shopify reported its Q1 2022 earnings for the quarter ended March 2022 on May 5, 2021. The Company reported earnings-per-share (EPS) profits of $0.20 missing consensus analyst estimates for $0.65, missing by (-$0.45). Revenues grew 21.7% year-over-year (YoY) to $1.2 billion, missing the $1.24 billion consensus analyst estimates. The Company announced the acquisition of Deliverr, an e-commerce fulfillment technology provider for $2.1 billion comprised of 80% cash and 20% stock. The Company also expects its top-line revenue growth to be lower in 1H 2022 and highest in Q4 2022. The Monthly Recurring Revenue (MRR) rose 17% YoY to $105.2 million as more retail locations joined the POS Pro platform. It's Subscription Solutions sales rose 8% YoY to $344.8 million. Gross Merchandise Volume (GMV) rose 16% YoY to $43.2 billion. Merchant Solutions revenues climbed 29% YoY to $858.9 million driven by the growth in GMV.
President and CFO Comments
Shopify President Harvey Finkelstein commented, "While we've experienced massive macro shifts since the start of the pandemic, the one mainstay has been that Shopify is the commerce platform of choice for merchants in any environment, with the ability to support commerce on any surface. This has earned Shopify significant merchant trust and the ability to help them with more parts of their business, which is why we are eager to bring Deliverr's team and technology to our merchants." Shopify CFO Amy Shapiro chimed in, "Our omnichannel capabilities helped merchants navigate the welcome return of foot traffic to their brick-and-mortar stores and enabled them to leverage the growing volume of commerce on social, in search and in apps. Being able to offer a delivery promise and fast fulfillment across all these channels boosts conversion."
SHOP Price Trajectories
Using the rifle charts on a weekly and daily time frame provides a precision view of the landscape for SHOP stock. The weekly rifle chart formed an inverse pup breakdown on the breakdown through the $66.30 Fibonacci (fib) level. The weekly rifle chart downtrend has a falling 5-period moving average (MA) resistance at $33.69 followed by the 15-period MA at $39.79, The weekly 200-period MA resistance sits at $72.99. The weekly stochastic is stalled at the 10-band. The weekly market structure low (MSL) buy triggers on a breakout through the $41.37. The daily rifle chart is breaking down again on a mini inverse pup with a falling 5-period MA at $31.76 and 15-period MA at $33.55. The daily lower Bollinger Bands (BBs) sit at $27.62. The daily stochastic formed a mini inverse pup slip testing the 20-band. The $30.53 has attempted to the line as support but the sellers are getting anxious as evidenced by the falling 5-period MAs on both the weekly and monthly charts. Prudent investors can look for opportunistic pullback entry levels at the $30.53 fib, $28.24, $26.22, $21.66, $19.63 fib, $17.66, $15.45, and the $13.82 fib level. Upside trajectories range from the $39.17 fib up towards the $50.71 fib level. Investors can also watch competitor Wix.com (NASDAQ: WIX) stock to gauge sentiment.
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