What happened
Shares of superstar e-commerce stock Shopify (SHOP +5.93%) dropped 15% in December according to data provided by S&P Global Market Intelligence. There wasn't any news specific to Shopify in December, but macroeconomic headwinds and a murky outlook impacted many great stocks in the past month.
So what
The drop in December was the end of an overall rough year for Shopify. Like many retail or retail-oriented companies, Shopify beefed up capabilities in 2021 to handle a huge surge in demand. 2022 came as a shock with rising inflation and matching interest rates, sending sales growth lower. Shopify was left with resources and expenses it didn't need that drained its profits.
It's still posting double-digit growth, though. Sales increased 22% year over year in the third quarter, and there were many other positive signs, such as increases in monthly recurring revenue. Net loss, however, came in at $158 million after a $1.1 billion profit last year.
Management has pledged to cut expenses and embarked on a savings plan to bring them in line with demand. However, it still expects a loss for the full fiscal 2022, and it may take time until Shopify becomes profitable again.
Now what
Shopify is a top e-commerce stock, powering global businesses with a huge variety of online solutions. It's no longer just for small businesses who need a turnkey platform to get online; it counts many large and medium-sized businesses among its clients. These are the most lucrative.
It has many ways to grow its business beyond adding customers, such as the recent launch of a point-of-sale system that integrates with online payments, and the option to offer global shipping seamlessly.
Shopify stock is down nearly 70% over the past year. Even at this price, it's not incredibly cheap, trading at a price-to-sales ratio of more than 9.
NASDAQ: SHOP
Key Data Points
That said, Shopify is a powerhouse company with a strong lead in its industry. It has millions of loyal customers and is continually improving its platform to provide more value for them. It has a long growth runway ahead and is likely to return to profitability.
There doesn't seem to be a rush to get in while the market is in flux, but investors who buy in now are likely to be rewarded over the long term. This isn't bargain-basement territory, but you can't time the market. If you see the potential here, you might want to consider Shopify stock for your portfolio.
