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Canada-headquartered e-commerce platform Shopify (NYSE:SHOP) was in the financial news headlines late last month. However, this wasn’t for any great achievements on Shopify’s part. Rather, it was because the company enacted a share split of SHOP stock. This might sound intriguing, but it’s not a sufficient reason to invest in Shopify now.
To be more specific, the company completed its 10-for-1 stock split on June 29. This summer has been called the “summer of splits” as a number of companies have enacted stock splits in mid-2022. Yet, this might be viewed as a passing fad or possibly even a gimmick to get retail traders to buy shares as they’re more affordable.
Bear in mind, though, that just because Shopify’s shares are more affordable, this doesn’t mean that they’re actually a bargain. Price isn’t the same as value, and judging by Shopify’s financials, there’s simply not much shareholder value to be found with this company.
What’s Happening with SHOP Stock?
On a surface level, the split may have made SHOP stock more enticing. After all, it’s easier for retail investors to buy a stock that’s in the $30s than one that’s priced at $300.
Notably, though, Shopify’s shares were already losing value rapidly prior to the split, as they had previously traded at $1,700 before tumbling to $300. Given the stock’s rapid downward trajectory, the share split might not have even been necessary or justified.
Overall, it’s too early to assess whether the split has had a positive or negative impact on SHOP stock. More important than that, though, is the question of whether Shopify is a business that’s worth investing in. On that topic, a strong argument could be made that Shopify’s best days are in the rear-view mirror.
The Times Have Changed
Sure, Shopify thrived in 2020 and part of 2021 due to Covid-19 as physical stores were shuttered and companies scrambled to set up online storefronts. In mid-2022, however, bricks-and-mortar stores are open. Plus, rising inflation has put many shoppers in a less-than-generous mood.
Indeed, SHOP stock is the poster child of hyper-growth stocks of 2020 and 2021 that are fizzling this year. The data tells the tale, as Shopify’s third-quarter 2021 revenue increased 46% year-over-year (YOY). In the fourth quarter, Shopify’s revenue rose 41%, while in 2022’s first quarter, the company’s revenue grew 22%.
Thus, we’re witnessing a pattern of slowing revenue growth with Shopify. The picture gets even darker when we examine the company’s bottom-line results. Shopify posted net income in Q3 2021, but then reported a $371.3 million net earnings loss in Q4. Then, in Q1 2022, the company’s net loss widened to an eye-watering $1.5 billion.
Bottom Line on SHOP Stock
The times have changed, clearly, and Shopify isn’t adjusting well. In other words, the catalysts that benefited Shopify a couple of years ago aren’t helping the company today.
It’s awfully hard to find good value in a company with diminishing revenue and no net profit. Hence, it’s wise to steer clear of summertime share-split mania and avoid SHOP stock at any price.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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