What happened?
Shopify (TSX: SHOP)(NYSE:SHOP) stock crashed by nearly 20% last week, posting its worst weekly losses since it went public in 2015. SHOP stock settled at $1,110.40 per share on Friday — its lowest closing level in more than 18 months. The stock is now trading with massive 39% year-to-date losses as compared to a 2.3% drop in the TSX Composite Index in 2022 so far.
So what?
If you have been following the Canadian tech industry lately, you might be aware that Shopify has been the worst victim of the ongoing tech meltdown. While the shares of many other tech companies like Lightspeed and Docebo have also fallen sharply in January, no TSX Composite component has crashed as much as Shopify stock.
Many notable Street analysts from investment firms like Piper Sandler, Wedbush, and Stifel have cut their target prices on Shopify stock in January. Last week, Deutsche Bank joined these investment firms by turning less optimistic on the stock than earlier. Deutsche Bank now gives a 12-month target price of $1,400 per share on SHOP stock — much lower than its earlier target price of $1,650 per share.
It’s important to note that most investors closely watch an upgrade or downgrade by a popular Street analyst, resulting in big moves in the share prices. These consistent downgrades amid the ongoing pullback in high-flying tech stocks could be the primary reason why SHOP stock plunged by nearly 20% last week.
Now what?
On January 18, Shopify made a big announcement of joining hands with the Chinese tech giant JD.com to make it easier for its U.S. merchants to offer their products in China. This partnership would allow Shopify’s U.S. merchants to use JD’s warehouses and logistics to fulfill orders for their customers in the world’s largest e-commerce market.
However, even this apparently positive news failed to boost investors’ confidence, leading to a consistent fall in Shopify stock. Most investors are currently focusing on the big monetary policy announcements expected later this week. That’s why in my recent article, I asked investors to avoid buying SHOP stock right away, as they might get a better bargain in the near term.
That said, I still do not doubt that the ongoing crash in Shopify’s stock prices is likely to create an opportunity for long-term investors to buy a great high-growth stock cheap.
