It is the holiday season. You have been shopping for gifts for your friends and family. Retailers are stocked up and this year’s Black Friday sales once again made a new high. The Black Friday sale is so huge that it even dented Canada’s inflation in November. According to Statistics Canada, Black Friday deals contributed to lower prices for household operations, furnishing, equipment, clothing, and footwear. One company that continues to benefit from these deals is Shopify (TSX:SHOP).
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Shopify’s growth cycle
This year, the Black Friday-Cyber Monday weekend produced some interesting highlights for Shopify:
- 16,500+ entrepreneurs made their first sale on Shopify
- More than 67,000 merchants had their highest-selling day ever on Shopify
- Merchants made $11.5 billion in global sales, up 24% year-over-year
- Cross-border orders represented 16% of all global orders
- Sales made via Shop Pay increased 58% year-over-year
These numbers show that more merchants are joining Shopify and expanding their sales outreach. Shopify is also monetizing its platform with Shop Pay and other services. It’s no longer only doing business in Canada or the United States. Shopify is now expanding globally like Amazon.
The growing presence and acceptance of Shopify as a shopping platform creates room for more frequent seasonal sales. It can enjoy holiday season volumes beyond Black Friday. However, it would take time as Shopify still has to strengthen its outreach in the offshore markets.
Outlook for Shopify stock
While the e-commerce platform continues to enjoy organic growth of 20% to 25% annually in general merchandise volume (GMV), the stock moves seasonally. The period from November to January is the peak season for the stock as the company earns more than one-third of its revenue in this quarter.
However, not all years see seasonal peaks. Some years might see a dip during the season due to macroeconomic weakness. For instance, Shopify stock fell 49% between November 2021 and early February 2022. This decline was owing to high inflation affecting spending power and fears of interest rate hikes dampening the economic outlook.
The outlook for 2025 looks bright for Shopify. Firstly, the interest rate cuts will continue in 2025 although at a slower rate. There is a higher probability of an increase in inflation if U.S. President-elect Donald Trump imposes tariffs on U.S. imports and boosts American employment. While the tariff could increase inflation by making imports expensive, it could promote domestic goods. This could create a labour shortage and increase salaries. A higher salary could boost consumer spending and produce moderate inflation.
Shopify stock could see a correction in February or March 2025, creating a buying opportunity. The growth could pick up from July onwards.
How to invest in seasonal stocks
If you already own Shopify stock, you could consider booking profits while the stock trades above $155. You could consider buying the stock again once the price falls to $110 or lower during the seasonal dip in June. Opportunistic buying and selling in a seasonal stock like Shopify can help you maximize your returns more so than holding it for the long term.
You could consider buying Shopify stock at the dip as its fundamentals remain strong. The company is gradually becoming profitable as it achieves scale. Profitability could improve further in 2025.
