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Why Shopify's Stock Dropped 13.6% in March

By Royston Yang - Apr 7, 2021 at 9:27AM

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The e-commerce company should see slower growth this year but continues to work on improving its platform capabilities.

What happened

Shares of Shopify (SHOP 11.56%) dropped 13.6% in March, according to data provided by S&P Global Market Intelligence.

The e-commerce company spiked up to a new all-time high of $1,474 in February but its shares are now just up 1.3% year to date.

Lady looking at cupcake that she is holding in her right hand.

Image source: Getty Images.

So what

Shopify is a classic case of being a victim of its own success. Growth in 2020 was stellar due to the onset of the pandemic, with subscription revenue growing 41.5% year over year to $908.8 million and merchant solutions revenue more than doubling year over year to $2 billion. Gross merchandise volume (GMV), a measure of transactions through Shopify's platform, soared by 96% year over year to $119.6 billion. 

But with the pandemic situation improving as vaccines are being rolled out globally, Shopify's growth last year is now looking increasingly like a temporary spike. The company has reiterated that subscription solutions and GMV growth are still expected to be high, but should not exceed the growth rate recorded in 2020. Investors may have felt disappointed that growth will be slowing down, and this fact, coupled with a general sell-down in technology-related stocks last month, could have been responsible for the decline in Shopify's share price.

Now what

Despite this declaration, investors should be cheered by the fact that more merchants and entrepreneurs continue to join its platform. The pandemic fostered the growth of home businesses and showed many a viable alternative to working a salaried 9-to-5 job. Shopify will also continue investing in technology upgrades to improve its services, such as integrating its fulfillment network and optimizing its distribution reach.

Supplier GreenDropShip also recently launched an e-commerce app for Shopify that allows sellers to add organic groceries to their online stores, thus opening up more options for them to build up their home businesses. 

The tailwinds look strong for Shopify to continue doing well, and investors should look forward to continued strong numbers for the company.

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