Insights

Why Shopify Stock Was Tumbling Again Today

What happened
Shares of Shopify (NYSE: SHOP) were sliding today as the e-commerce software company was one of several tech stocks to fall in sympathy with Snap (NYSE: SNAP), which warned that second-quarter results would come in below its earlier guidance and blamed a deteriorating macroeconomic environment for the downward revision. Though it might seem surprising for Shopify to fall on the news, the two companies are more closely connected than you might think.
As of 1:35 p.m. ET, Shopify stock was down 10.4%, while Snap had plunged 41.9% at the same time.
Image source: Getty Images.

So what
Digital advertising stocks in both social media and ad tech fell across the board, but Shopify was also one of the stocks to take a hit. Its 1.75 million merchants count on social media sites to drive demand for their products so if Snap is experiencing headwinds in demand, it’s likely that at least some of that is coming from Shopify sellers.
Shopify sellers also have a close relationship with Meta Platforms’ Facebook advertising, and a slowdown in ad spending across the sector is going to be correlated with a slowdown in Shopify sales.
In addition to macro headwinds related to rising interest rates and inflation, consumer spending is shifting back from goods to services, which is also expected to be a challenge for Shopify and its e-commerce peers as the company doesn’t benefit from spending on travel or restaurants.
Now what
Like much of the high-growth tech sector, Shopify stock has fallen sharply in recent months, down about 80% from its peak last November. However, Shopify’s guidance in its first-quarter earnings report offered some reason for hope. The company said that revenue growth would improve from the first-quarter mark of 22% in the second half of the year with its best quarter of the year expected to come in the fourth quarter.
Of course, guidance is always subject to change, but Shopify will enjoy easier comparisons as the year progresses. Whether Snap’s warning will prove accurate remains to be seen, but the recent market malaise could last several more months.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Meta Platforms, Inc., Shopify, and Snap Inc. The Motley Fool has positions in and recommends Meta Platforms, Inc. and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy. –

What happened

Shares of Shopify (NYSE: SHOP) were sliding today as the e-commerce software company was one of several tech stocks to fall in sympathy with Snap (NYSE: SNAP), which warned that second-quarter results would come in below its earlier guidance and blamed a deteriorating macroeconomic environment for the downward revision. Though it might seem surprising for Shopify to fall on the news, the two companies are more closely connected than you might think.

As of 1:35 p.m. ET, Shopify stock was down 10.4%, while Snap had plunged 41.9% at the same time.

Image source: Getty Images.

So what

Digital advertising stocks in both social media and ad tech fell across the board, but Shopify was also one of the stocks to take a hit. Its 1.75 million merchants count on social media sites to drive demand for their products so if Snap is experiencing headwinds in demand, it’s likely that at least some of that is coming from Shopify sellers.

Shopify sellers also have a close relationship with Meta Platforms‘ Facebook advertising, and a slowdown in ad spending across the sector is going to be correlated with a slowdown in Shopify sales.

In addition to macro headwinds related to rising interest rates and inflation, consumer spending is shifting back from goods to services, which is also expected to be a challenge for Shopify and its e-commerce peers as the company doesn’t benefit from spending on travel or restaurants.

Now what

Like much of the high-growth tech sector, Shopify stock has fallen sharply in recent months, down about 80% from its peak last November. However, Shopify’s guidance in its first-quarter earnings report offered some reason for hope. The company said that revenue growth would improve from the first-quarter mark of 22% in the second half of the year with its best quarter of the year expected to come in the fourth quarter.

Of course, guidance is always subject to change, but Shopify will enjoy easier comparisons as the year progresses. Whether Snap’s warning will prove accurate remains to be seen, but the recent market malaise could last several more months.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Meta Platforms, Inc., Shopify, and Snap Inc. The Motley Fool has positions in and recommends Meta Platforms, Inc. and Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here To Get Started
FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here For More Info