- Shopify (SHOP) is in a position to handle competition well.
- It has strong partnerships with top companies across the world that will help achieve growth.
- SHOP stock looks like a buy for the long term. This is a good entry point.
All e-commerce stocks have faced pressure as the pandemic-related tailwinds have started to ease. Several e-commerce companies saw the best growth during the pandemic, but they are now suffering. Shopify (NASDAQ:SHOP) is one of the companies that is facing a tough time due to the ease of restrictions. However, if investors continue to compare the company’s performance with that of the pandemic year, they will never be able to make the right choice. It offered an ideal solution for merchants to take their business online during the pandemic and we may not see the same top line growth this year. Stop looking at SHOP stock as a pandemic darling and think of it as a thriving e-commerce business because pandemic or not, e-commerce is here to stay.
SHOP stock is down 50% over the past six months and 43% over the past year. The stock was once trading as high as $1,762 and is down around $650 today. While I do not think the stock will hit the all-time high anytime soon, I do think that the stock has the potential to grow and rise over the coming months. With that in mind, let’s see what is working for SHOP stock.
| SHOP | Shopify Inc. | $651.81 |
Strong Partnerships Will Drive Growth
Shopify has 2 million active users and this number is growing consistently. But besides that, it also has solid partnerships with some of the biggest companies in the world, which will drive growth.
It has a partnership with JD.com (NASDAQ:JD), which will give access to at least 500 million active customers. The platform is a marketplace for third-party sellers and is a million-dollar opportunity for the e-commerce platform to enter a new market and grab a large user base. JD also has a supplier sourcing service for all the Shopify store owners where merchants can submit a product request through JD Sourcing and whenever it is available in the inventory, the company will be able to get it to one of the warehouses and have it ready for a listing on Shopify stores. This is a unique way of ensuring that buyers find exactly what they are looking for.
That said, it also has partnerships with Meta Platforms (NASDAQ:FB), Walmart (NYSE:WMT), TikTok, and Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL), which will contribute to revenue growth throughout the year.
To achieve higher growth, the company is investing heavily into capital expenses and is working toward making the app user-friendly for merchants and buyers. One thing is certain, the effects of the pandemic may wane, but e-commerce is the future. It is not going anywhere and the rise in the number of merchants on Shopify is proof that the company is moving in the right direction.
The Bottom Line on SHOP Stock
The management has not provided the sales guidance for this year, but it does expect the sales to grow at a slower rate than in 2021. These are challenging times for the company, but the management expects the business to grow at a strong rate throughout the year.
All in all, Shopify has a strong, promising long-term outlook. However, the company may continue to face a few bumps in business performance in the short-term. The competition is rising and it could be a threat to the company. But Shopify has a solid business structure and it will not lose to competition so easily.
You may not see the stock hit the highs of $1,700 anytime soon, but it will continue to grow slowly and steadily. The current dip is a good chance to buy SHOP stock.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
