Shopify’s Stock Is Falling Again After a 50% Four-Day Rally

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The wild gyrations in

Shopify shares offer a clear demonstration of the market’s ongoing mixed instincts. Investors are stalking bargains one minute, and shunning high-multiple software stocks the next.

A provider of e-commerce software, Shopify (ticker: SHOP) thrived during the pandemic, as many offline businesses rushed to add online storefronts. But as the economy has reopened, and more consumers return to physical retail stores, Shopify’s growth has slowed considerably.

Sales growth, which peaked at 110% in the March 2021 quarter after three straight quarters north of 90%, has decelerated for the past three quarters, dropping to 41% in the December 2021 quarter. The Street expects 2022 revenue growth of 31%, down from 57% last year.

Shopify shares have been crushed in 2022, with a year-to-date loss of about 50%. At their recent lows, a little north of $500 a share, the stock was down about 70% since the Nasdaq market’s peak in late November.

But Shopify shares bounced hard off the bottom. In the final four trading days last week, the stock rallied 52%, only to reverse course on Monday with a decline of more than 11%.

There was no company-specific news to explain last week’s rally or Monday’s slump.

While there is no question Shopify shares are cheaper than they once were, it is difficult to argue that the stock is inherently cheap, even at well under half its recent peak level. Shopify has a market capitalization of about $78 billion, or about 10 times anticipated current-year revenue, and 150 times estimated earnings for the current year.

Amazon.com doesn’t offer a perfect comparison, but consider that the stock (AMZN) trades for about three times expected per-share sales, and about 65 times projected profits.

EBay (EBAY) trades for three times forward sales and about 13 times estimated current-year earnings.

Meanwhile, the pandemic-era growth spurt in online retailing is showing signs of moderation. Last week, Adobe estimated that U.S. online retail sales rose 9% in 2021, following 41% growth in 2020.

Adobe sees 2022 U.S. e-tail sales hitting $1 trillion, up about 13% from last year.

Write to Eric J. Savitz at [email protected]