Despite a rising market, Shopify investors won this week. Data from S&P Global Market Intelligence shows that the e-commerce stock jumped 29% through Thursday’s trading, compared to a 3.5% rise in the S&P 500.
Stock prices remain down by about 70% so far in 2022, despite the rally erasing a small proportion of shareholders’ losses. Despite this, investors are becoming less pessimistic ahead of a key earnings report.
What’s the fuzz?
The stock price fortunes of Shopify were driven mainly by the rising market. As a result of rebounding optimism on Wall Street, the tech-heavy Nasdaq index rallied by 11% through Thursday trading. It’s not surprising that such a shift in sentiment would benefit Shopify, given its significant declines in 2022.
Investors are also interested in the stock for some specific reasons today. On July 27, Shopify will announce its fiscal Q2 earnings results, and the company may exceed Wall Street’s low expectations.
Most investors expect weaker sales trends for a second consecutive quarter before the stock’s growth accelerates. In recent days, tech giants, including Netflix, have reported stabilizing sales trends, which has boosted hard-hit stocks like Shopify.
As a result of its recent acquisition of Deliverr, Shopify’s sales trends will soon show an immediate increase. As for Thursday’s earnings update, subscription-based revenue (a function of pricing), merchant engagement, and demand for Shopify Plus are the key metrics to watch.
Inflation, slowing economic growth, and the soaring demand a year ago will likely slow Shopify’s growth. However, stocks spiked this week, suggesting that this slowdown might soon stabilize.
Despite recent sharp declines in Shopify stock, the company still has room to rebound if it can demonstrate that investors have become overly pessimistic about the stock.