Why Shopify Stock Plunged 10% Friday

The ongoing tech selloff could help you get even a better bargain on Shopify stock in the near term.

Jitendra Parashar

Author Bio Jitendra Parashar is a financial journalist who has been writing for The Motley Fool Canada since June 2020. With more than 13 years of experience in financial journalism, equity research, and market analysis, he helps investors understand market developments and identify long-term investment opportunities. Before joining The Motley Fool Canada, Jitendra spent several years at Market Realist covering U.S. equities, major economic developments, and developments in the automotive and technology industries. He also worked in commodity and currency research at brokerage firms, gaining insight into how economic trends, central bank decisions, and geopolitical events influence financial markets. Jitendra writes for beginner investors, dividend seekers, and Canadians looking to build wealth over the long term. He also contributes to the daily TSX Today series, explaining key Canadian market developments and highlighting news investors should watch. Based in India, Jitendra follows Canadian and U.S. markets closely. Outside of work, he enjoys travelling in the Himalayas, street and nature photography, and exploring programming and artificial intelligence. Education MBA in Finance and International Business Bachelor's degree in Journalism Areas of Expertise Canadian and U.S. financial markets, long-term equity investing, dividend investing, macroeconomic and geopolitical trends, automotive stocks, emerging technologies, and artificial intelligence. Social Media Profiles LinkedIn Muck Rack Favorite Investment Quote “Simplicity is the master key to financial success.” — John C. Bogle

Published January 21, 2022 1:57 pm EST

What happened?

Shopify’s (TSX: SHOP)(NYSE:SHOP) stock price plunged by about 10% on Friday, taking it in the red territory for the fourth consecutive session. At the time of writing, SHOP stock was trading at $1,158 per share at its lowest level in more than a year. Today’s big selloff also extended its year-to-date losses to well more than 30% against 2.5% losses in the TSX Composite Index.

So what?

If you’ve been following SHOP stock or the tech sector in general lately, you might already be aware of the ongoing pullback in tech stocks. The recent selloff has affected high-flying tech stocks with lofty valuation multiples the most. That’s why today’s sharp losses in Shopify stock shouldn’t come as a big surprise to most investors.

That said, some popular Street analysts seem to be turning less optimistic about the stock lately. For example, Deutsche Bank cut its target price on Shopify stock to $1,400 per share from its earlier target of $1,650 per share. This could be one of the reasons prompting investors to cut their position in SHOP stock today — intensifying its selloff further.

Investors also seem to be cutting their exposure to risk on Friday ahead of the next week’s key U.S. Federal Open Market Committee meeting, taking tech stocks across North America downward today.

Now what?

It’s important to note that today’s heavy losses in SHOP stock came just a few days after the company announced its partnership with the Chinese e-commerce giant JD.com. The partnership would make it easier for Shopify merchants to sell their products in China. That’s why I consider this move to help the Canadian e-commerce company expand its merchant base in the coming years, giving a further boost to its sales growth.

Despite all these positive factors, I still won’t recommend buying Shopify stock right away, as the ongoing tech selloff could help you get a better bargain in the near term.