Of course, a stock’s current price doesn’t tell us where it’s going. That depends on a million factors, ranging from fundamentals and insider buying to publicity and hype. But this September, Shopify is fresh off a string of good news stories that’s likely to drive investor interest higher. Accordingly, it has a good chance of soaring in September as long as the broader markets behave reasonably well. The following are three key reasons why.
Reason #1: The TikTok deal
One big reason why Shopify could soar in September is because of its deal with ByteDance’s popular TikTok service. TikTok is the fastest-growing social media app in the world and is rapidly becoming one of the largest. It may be the largest already in terms of mobile downloads, as it’s rapidly closing in on 1.1 billion users. Shopify’s integration will allow influencers to sell their Shopify store’s products directly on TikTok. The exact revenue impact of this won’t be known until next quarter or later, but the hype surrounding the story could drive the stock higher anyway.
Reason #2: Strong growth
Another reason why Shopify could rally higher in September is because of its sky-high growth. Shopify’s revenue grew at 56% in its most recent quarter and grew at over 90% in the four quarters prior to that. It has been an incredible thing to witness — so much so that some commentators actually reacted negatively to the 56% second-quarter growth rate. Having 56% year-over-year growth is in itself amazing, but, compared to the prior four quarters of revenue basically doubling, it looks weak. Ultimately, it doesn’t matter, though. Even with the deceleration, SHOP still beat on both revenue and EPS in the most recent quarter. So, the company’s prospects look rosy.
Reason #3: Celebrity endorsement
Last but not least, Shopify has one big factor that could cause it to rally higher in September: celebrity endorsement.
Now, I’m not saying that celebrities are running out to their social media accounts to promote Shopify, but implicit support is there. Specifically, it is there in the form of celebrities hosting their stores on Shopify. You see, over the years, Shopify has become the platform of choice for celebrity merchandise. Some leading celebs on the platform include the following:
- Jeffree Star
- Justin Bieber
- Kanye West
The fact that these celebrities host their sites on Shopify is encouraging, because it could give Shopify some cultural cachet. Certainly, it’s not a secret that these celebs host their stores on Shopify. If it becomes even more widely known, then that could lead to more vendors — especially entertainers — signing up. People have a tendency to follow the popular, and SHOP currently leads among e-commerce platforms when it comes to courting the world’s top celebrities. In time, that could lead to real revenue gains for the company.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and Shopify. The Motley Fool recommends the following options: long January 2022 $1,920 calls on Amazon, long January 2023 $1,140 calls on Shopify, short January 2022 $1,940 calls on Amazon, and short January 2023 $1,160 calls on Shopify.