Why Shopify Stock Plunged Another 10% Monday

After today’s big losses, Shopify stock is now trading near its lowest level since June 2020.

| More on:
Shopping and e-commerce

Image source: Getty Images

What happened?

The ongoing selloff in Shopify (TSX:SHOP)(NYSE:SHOP) stock doesn’t seem to be ending soon. SHOP stock tanked by another 10% on Monday afternoon after losing nearly 20% of its value last week. With this, the Canadian tech stock is now down by about 42% on a year-to-date basis compared to a 5.7% decline in the TSX Composite benchmark.

So what?

In many of my recent articles, I’ve explained some key reasons for the ongoing stock market selloff. Speculations about the U.S. Fed’s and Bank of Canada’s latest monetary policy moves are keeping investors on their toes. While these speculations have led to a market-wide sharp decline, they have hit some high-growth tech shares like Shopify the hardest.

Along with the ongoing market selloff, Street analysts are continuing to turn less optimistic on SHOP stock, despite its consistent efforts to expand its business. After Deutsche Bank cut its target price last week, analysts at Wedbush today reduced their 12-month target price on Shopify to $1,296 per share from $1,500 per share earlier.

While Wedbush’s latest target is significantly above its current market price of $1,047 per share, these consistent downgrades are definitely adding pessimism, thus hurting investors’ sentiments. These factors coupled with the tech sector-wide crash are the main reason why SHOP stock dived sharply today.

Now what?

The recent Shopify stock price crash looks horrifying at first. And well, it surely is if you’d bought the stock a few months ago when it was trading at its record highs. However, if we look at the company’s recent financial growth trends, we would find the recent drop as an opportunity to buy an amazing high-growth stock at a big bargain with high expectations of a recovery.

While Street analysts may keep adjusting their target prices on SHOP stock due to the ongoing tech meltdown, these factors won’t change its long-term growth outlook. That’s why you may wait to add stocks like this to your portfolio on any concrete signs of a trend reversal in the coming weeks.

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.

The Motley Fool owns and recommends Shopify. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

More on Tech Stocks

online shopping
Tech Stocks

Shopify Stock: Can it Stay Above $400?

Shopify (TSX:SHOP)(NYSE:SHOP) stock has sunk over 80% from its peak level. Is there any value to be had by catching…

Read more »

Online shopping
Tech Stocks

Shopify (TSX:SHOP) Stock: Is the Bottom Here Yet?

If you can predict when a stock has fully bottomed out, you can maximize the return potential by locking in…

Read more »

Tech Stocks

2 Cheap Tech Stocks to Buy After Their Impressive Earnings

Given their healthy growth prospects and discounted stock prices, I am bullish on these two tech stocks.

Read more »

value for money
Tech Stocks

3 Tech Stocks Trading for a Significant Discount

These tech stocks have corrected quite a lot, despite the strength in their business, making them attractive long-term bets.

Read more »

Shopping and e-commerce
Tech Stocks

Shopify Stock: What Investors Should Do if it Falls to $300

Shopify (TSX:SHOP)(NYSE:SHOP) stock fell another 10% on Tuesday, as it nears the $300 range. So, what happens if that comes…

Read more »

consider the options
Tech Stocks

Will Enthusiast Gaming Stock Change Course After the Activist Attack?

Last week's cheer in Enthusiast Gaming stock is reversing this week.

Read more »

sale discount best price
Tech Stocks

Tech Selloff: 3 Bargains to Pick Up Now

Thanks to the current slump, you can buy many tech stocks at a discount price or valuation that's usually quite…

Read more »

TSX Today
Tech Stocks

TSX Today: What to Watch for in Stocks on Wednesday, May 25

Apart from bank earnings, TSX investors may want to keep an eye on the FOMC meeting minutes today.

Read more »