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Thursday, September 28, 2023

Shopify (SHOP) Stock Grew By 188% This Year, But e-Commerce Platform Has To Struggle Ahead

Since the beginning of this year, shares of the e-Commerce platform Shopify Inc. (SHOP) have risen by 188%. The growth driver was the momentum in e-Commerce against the background of COVID-19. However, Wall Street analysts ‘ opinions on the future of Shopify are mixed.

According to positive analysts, Shopify will continue to improve business efficiency, attract new customers, expand the ecosystem and increase the volume of goods sold. However, not everyone agrees.

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In particular, in the past quarters, the main growth of Shopify occurred due to the arrival of small merchants on the platform, who were forced to start online sales due to lockdown and the closure of stationary stores. But not all of these businesses will be able to survive in the conditions of dominance in e-commerce of such giants as Walmart, Amazon, Target, etc. Therefore, these new customers may leave the Shopify platform in the long run or close the business altogether.

Despite the rapid growth of e-commerce, today it accounts for only 14% of U.S. retail sales. In the long run, as already mentioned, the leading role in this direction will be played by large retailers, and not by small companies that are the main customers of Shopify.

What can save Shopify from a negative scenario? First of all, focus on big players and diversification. The company is already investing in areas such as robotics, payment services, order processing services for third-party sellers, etc. In the future, this will provide additional revenue, as well as better customer retention. Thus, the future of Shopify depends on investing in new directions, and not just on the development of the main e-Commerce platform.

In the last quarter, Shopify’s revenue grew by 96% with an increase in the volume of goods sold by 109%. This helped Shopify turn a profit after losing money the previous year. The company’s revenue this year should be almost $3 billion.

Shopify Inc. (SHOP) was down -6.4% to $1,147.06.

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