What happened

Shares of Shopify (SHOP 4.22%) were soaring today even though there was no direct news out on the stock. Instead, a combination of factors seemed to contribute to its gains, including outperformance in the tech sector today, weak reports by brick-and-mortar retailers, and the perception that the stock is undervalued.

As of 1:06 p.m. ET, shares were up 12.1%.

A person holds a credit card while looking at a laptop.

Image source: Getty Images.

So what

Out of the three major indexes, the Nasdaq was the top performer this afternoon, up 0.3% compared to a 0.9% loss for the Dow Jones Industrial Average and a 0.6% decline in the S&P 500. That seems to indicate that after several months of the Nasdaq underperforming its peers, investors believe that tech stocks could be undervalued, especially compared to the blue chip stocks that make up the Dow.

More specifically to Shopify, retail earnings this week have shed light on how difficult the environment is in the industry, with Walmart and Target both falling sharply on lower profits, and Kohl's today reporting that both revenue and profits were down in the quarter.

Against that backdrop, Shopify's first-quarter results may look better to investors than they initially did. The stock plunged on its first-quarter report earlier in the month as revenue growth slowed to 22%, but that was primarily due to broad industry headwinds as spending shifts from goods and services.

Target's and Kohl's management both said that sales trends had improved in May after tough comparisons in March and April, a favorable sign for Shopify as well.

Finally, Shopify has fallen sharply in recent months, and is still down about 75% from its peak last November. Fears of slowing growth and Amazon's new "Buy with Prime" program have weighed on the stock, but there's a good argument that it's oversold at this point.

Now what

Shopify shares have been highly volatile in recent weeks as the high-priced e-commerce stock reacts to shifts in market sentiment as well as new macroeconomic data and commentary from the Federal Reserve. 

While rising interest rates is generally a negative for growth stocks like Shopify, bringing inflation under control would help the stock, especially if the Fed can do that without sinking the economy into a recession. Similarly, the first quarter could mark the nadir of the company's revenue growth as it's now fully lapped the last quarter before vaccines were widely available.

At this point, the stock looks priced as if the growth story is dead. If it can prove otherwise, the stock could soar.