Shares of Shopify (SHOP 4.11%) were moving higher today in line with a number of growth stocks in a day with broad gains across the market.
The e-commerce software company seemed to benefit from favorable comments from Fed Chair Jerome Powell about lowering interest rates. Additionally, stocks rose on news of a ceasefire between Iran and Israel, though that seemed to have less of a direct effect on Shopify.
As of 3:21 p.m. ET, the stock was up 4.6%. At the same time, the Nasdaq Composite was up 1.6%.
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Shopify gets a boost
There was no company-specific news out on Shopify, but as an e-commerce software company with a high valuation, Shopify is sensitive to the macroeconomic cycle, including interest rates.
On Tuesday, Fed Chair Jerome Powell said in remarks before Congress that rate cuts could come "sooner rather than later," though he stressed that the central bank could wait to see how tariffs play out.
In its "dot plot" forecast last week, the Fed maintained its prediction that it would cut the Fed funds rate by 50 basis points over the remainder of the year, the same forecast it made earlier this year, meaning investors should expect two 25 basis-point cuts in the remaining four meetings.
That's good news for Shopify as rate cuts should lower the discount rate in the discounted cash-flow valuation investors use to value stocks like Shopify. Lowering the discount rate increases Shopify's valuation.
What's next for Shopify
With its legions of small-business sellers, Shopify is at risk from higher tariffs, but the company offered strong guidance in its first-quarter earnings report, calling for mid-20s revenue growth rate and a free-cash-flow margin in the mid-teens.
If it can maintain those numbers, the stock should continue to rise over the long term.
