Investors in e-commerce giant and Canada’s most valuable company Shopify (NYSE:SHOP) haven’t enjoyed 2021 quite so much as 2020. Last year, SHOP stock delivered a return of 188%. This year? While that growth trajectory continued into February, shares soon slumped. The market turned on tech stocks, sparking a broad selloff. There was also concern that reopening after the pandemic would impact e-commerce companies like Shopify. The latest hit is one of the company’s own making: Three of Shopify’s seven C-Suite executives are leaving the company.
Shopify stock is down nearly 20% from its mid-February all-time high. This could be a worrying sign of a company that is overvalued and experiencing a correction. Or, it could be an opportunity to invest in a high-growth-trajectory company at an attractive price. Which is it?
Shopify isn’t a sure thing. SHOP stock rates a “B” in Portfolio Grader. However, it’s a proven performer that was strengthened by the pandemic. If you already own shares, now is not the time to panic. If you’re considering adding Shopify to your portfolio, now may well be an opportunity.
Shopify Loses Three More C-Suite Executives
Let’s look at the latest issue that’s impacted Shopify. On April 14, the company’s CEO announced that three of Shopify’s seven C-Suite executives will be leaving the company. The departures include an 11-year veteran of the company.
News of the departures sent SHOP stock sliding 5%.
Shopify tried to cushion the news, noting that no one was being pushed out:
“Each one of them has their individual reasons but what was unanimous with all three was that this was the best for them and the best for Shopify.”
Given the company’s valuation, it’s hardly surprising that some senior-level, long-term employees would decide now is the time to cash out. Losing three at once is unusual, but hardly reason to panic. As the company’s CEO points out, each of these executives grew through the ranks and had previous roles at the company. And that model means the process will repeat itself:
“We have a phenomenally strong bench of leaders who will now step up into larger roles.”
Concerns About Reopening
No one can argue that the pandemic hasn’t been great for Shopify’s business. The combination of people staying home and shopping online, plus a scramble by small businesses to get online has delivered incredible results for the company.
Look no further than last year’s Black Friday/Cyber Monday numbers for proof of that. Sellers on Shopify’s platform reported sales of $5.1 billion over that long weekend of shopping. Those numbers were up a whopping 76% over 2019.
That kind of growth was behind the phenomenal performance of SHOP stock in 2020. However, it’s also become a source of consternation in 2021. Numerous e-commerce stocks were punished in March, amid worries that vaccination and re-opening would see shoppers return to stores and ditch their online shopping habit.
However, that worry is likely unjustified, especially in the case of Shopify. Many consumers caught the online-shopping bug in 2020. While they may go back to stores, they’re also likely to keep shopping online as well — the convenience is tough to give up. Shopify added a lot of small businesses to its platform who had no online presence prior to 2020. They are now reaching a global market, expanding sales far beyond their traditional area. I’m not exaggerating when I say “global.” According to Shopify’s data, 14% of the purchases over Black Friday/Cyber Monday were shipped across borders.
With a dramatic increase in both shoppers and sellers on its platform, Shopify is positioned to see continued growth — despite the winding down of the pandemic. Just not 2020-level growth. In its 2021 guidance, Shopify put it like this:
“… some consumer spending will likely rotate back to offline retail and services, and the ongoing shift to ecommerce, which accelerated in 2020, will likely resume a more normalized pace of growth.”
Bottom Line on SHOP Stock
If you buy into concerns about reopening spelling the end of the pandemic “good times” for e-commerce stocks, or the fear that tech stocks in general face an ongoing correction, then SHOP stock is probably not for you. However, for those who see the long-term growth potential in Shopify, the recent weakness offers opportunity.
On the date of publication, Louis Navellier had a long position in SHOP. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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