What happened
Shares of Shopify (SHOP 1.11%) rose 8% on Tuesday, as several macroeconomic factors helped to boost investor interest in the commerce platform's stock.
So what
Rapidly rising COVID-19 case counts in Asia and Europe are sparking fears of a new round of lockdowns after China imposed restrictions on several of its largest cities to stem an outbreak attributed to a highly contagious coronavirus variant.
The shutdowns could tangle global supply chains and slow the economy's recovery, but they could also lead to a reacceleration in e-commerce growth. Shopify would be a prime beneficiary of stronger online sales.
Image source: Getty Images.
At the same time, oil prices have pulled back sharply from their recent highs. Lower gasoline prices should reduce shipping costs for e-commerce companies. That in turn could eliminate the need for fuel surcharges (which would have likely dented merchants' sales if implemented) and help to protect their profit margins.
Now what
Shopify has become the de facto online retail operating system for countless companies. Millions of businesses across 175 countries have generated more than $200 billion in sales on its platform.
Moreover, Shopify has designed its services to scale along with its merchants' sales. Thus, factors that contribute to the success of its merchant customers also tend to increase Shopify's sales and profits. Astute investors know this, and they're bidding up its stock price to reflect the recent trends that are likely to drive more retail sales to online channels.
