104529030 – konskie, poland – june 02, 2018: shopify website displayed on smartphone hidden in jeans pocket

The Shopify stock price has struggled lately. SHOP has dropped by more than 26% from its all-time high of $1,527 to today’s $1,106. The company has a market value of more than $137 billion, making it one of the biggest e-commerce firms in the world.

Shift from Lockdown Stocks

The Shopify stock price has retreated recently because of the ongoing rotation from lockdown stocks to reopening stocks. Lockdown stocks is a relatively new term that looks at stocks that benefited substantially because of the pandemic. This includes names like Square (SQ), Carvana (CVNA), Twilio (TWLO), and Zoom Communications (ZM).

The market believes that these lockdown stocks will struggle as the world reopens. Furthermore, many developed countries like the United States and the UK have already vaccinated most of their people. 

Shopify was one of the leading beneficiaries of the pandemic. As people stayed indoors, most of them embraced e-commerce. This led to more sales by companies that use Shopify’s platform. At the same time, many people who lost their jobs rushed to open new businesses. Again, the company made money from these new businesses. 

Shopify also benefited from Shopify Capital, a new business that works like Square Capital. The firm simply leverages the vast amount of data it has from its customers to offer them loans. In the first quarter, Shopify provided more than $300 million to businesses.

Shopify made more than $988 million in the first quarter, a whopping 110% year-on-year increase. This growth was fueled by a 71% increase of its subscription business. Its MRR revenue rose by 62% to more than $89.9 million while merchant solutions revenue rose by 137% to $668 million. The firm also generated more than $17 billion in Shopify Payments.

Shopify Stock Price Analysis

SHOP stock price chart

The daily chart does not paint a good picture for the SHOP stock price. As you can see, the 50-day and 100-day exponential moving averages (EMA) have made a bearish crossover. This is usually a relatively bearish sign. At the same time, the stock seems to have formed a head and shoulders pattern, which is also a bearish signal. Its neckline is at the psychological level of $1,000. 

Therefore, in the near term, I suspect that the shares will keep falling as bears target the next key support at $900, which is about 20% below the current level. However, a move above the right shoulder at $1,300 will invalidate this trend.

Still, for long-term investors, Shopify is a good investment, thanks to its strong annual recurring revenue, strong market share, and overall expansion of the e-commerce industry.

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