Shopify (TSX:SHOP) stock sinks 13%: Still a good buy?

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Shopify (TSX:SHOP) stock sinks 13%: Still a good buy?

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Shopify (TSX: SHOP) stock sinks 13%: Still a good buy?
Image source: © 2022 Kalkine Media®        

Highlights 

  • Stocks of Shopify Inc plunged by over 13 per cent on Friday, January 21.
  • Some market experts believe that Shopify, like other high multiple tech growth stocks, is caught up in the tech stock selloff led by the fear of interest rate hike.
  • Retail e-commerce sales, on a seasonally adjusted basis, declined by 3.5 per cent YoY in November 2021, according to a Statistics Canada report released on Friday, January 21.

Stocks of Shopify Inc plunged by over 13 per cent on Friday, January 21.

Some market experts believe that Shopify, like other high multiple tech growth stocks, is caught up in the tech stock selloff led by the fear of interest rate hike.

Let us glance at the stock performance and financials of Shopify.

Shopify Inc (TSX: SHOP) stock performance

The Ottawa, Ontario-based e-commerce giant, which presently has a price-to-earnings (P/E) ratio of 32.3, is one of the biggest e-commerce players and could continue to top the industry.

Its stock price closed at C$ 1,110.4 apiece on Friday after hitting a 52-week low of C$ 1,091.76.

Shopify scrip shrank by approximately 50 per cent from its one-year high price of C$ 2228.73 apiece (November 19, 2021).

The e-commerce scrip plummeted by over 36 per cent year-to-date (YTD).

Also read: Why is Netflix (NFLX) stock trending?

Shopify Inc Q3 FY2021 financial results

Despite its recent stock price decline, some analysts are still optimistic about the company’s prospects due to its robust financials.

The e-commerce infrastructure provider saw its revenue jump 46 per cent year-over-year (YoY) in the third quarter of fiscal 2022 to US$ 1.12 billion.

Shopify’s subscription revenue was up 37 per cent YoY to US$ 336.2 million in the latest quarter. 

Its gross merchandise value (GMV) increased by 35 per cent YoY in Q3 FY2021 to US$ 41.8 million, driving up the merchant solutions revenue to US$ 787.5 million, i.e., 51 per cent growth YoY.

Shopify, which currently holds a return on equity (ROE) of 39.04 per cent, earned a net income of US$ 1.14 billion in the latest quarter, substantially up from US$ 191.1 million in Q3 FY2020.

 Shopify Inc (TSX: SHOP) Q3 FY2021 financial results

 Image source: © 2022 Kalkine Media®        

Data source: Shopify Inc

Bottomline

In Canada, retail e-commerce sales noted a fall of 3.5 per cent YoY in November 2021 on a seasonally adjusted basis, according to a fresh report released by Statistics Canada on Friday, January 21.

Amid other reasons, the ongoing supply chain constraints have been a crucial factor that has and continues to impact e-commerce growth.

Some market experts, however, believe that investors who are in for the long run can consider Shopify Inc stock as a viable investment option as the e-commerce space is likely to pick up pace again in the future.

Also read: Suncor Energy (TSX:SU): An oil & gas stock for long-term growth?

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