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In a world where e-commerce has become the beating heart of the modern economy, Shopify has established itself as an essential platform for thousands of merchants. But behind the attractive success of this company lies a complexity that leaves many investors perplexed: should you buy, sell or keep your Shopify shares? While some cry out for opportunity, others point to warning signs that could shake up well-established investment strategies. Prepare to dive into deep analysis, revealing a shocking truth that could transform your financial approach and redefine your investment choices.
In November 2021, the shares of Shopify reached an all-time high of $169.06 thanks to the impressive growth of the e-commerce platform. However, the stock has been in a free fall, trading around $60 today. This dramatic drop raises a crucial question: is it time to buy, sell, or hold Shopify?
Reasons to buy Shopify
Despite its fall, Shopify continues to attract investors thanks to its disruptive business model. By providing self-service tools that allow anyone to create an online store, process payments, and run marketing campaigns, Shopify helps merchants free themselves from the hassle of online marketplaces as Amazon.
Demand for its services remains robust. From 2013 to 2023, Shopify saw its revenue grow at a compound annual rate (CAGR) of 64%. Although growth slowed in 2022 after the pandemic, the metrics stabilized in 2023.
To read Is there still time to invest in Shopify stock?
| Year | Revenue Growth |
| 2019 | 47% |
| 2020 | 86% |
| 2021 | 57% |
| 2022 | 21% |
| 2023 | 26% |
From 2023 to 2026, analysts forecast revenue growth at a CAGR of 21%, driven by new generative AI tools and payments platform expansion Shop Pay.
Reasons to sell Shopify
The main argument against Shopify is its high valuation. Despite its growth prospects, the stock trades at 176 times generally accepted accounting standards (GAAP) forward earnings for this year, and the company is still worth $96 billion in enterprise value.
In comparison, Amazon trades at 39 times forward earnings and three times this year’s sales. Even the slightest unexpected earnings gap or economic headwinds could easily compress its valuations.
So, buy, sell or keep Shopify?
Shopify still has a bright future, but its valuations may limit near-term gains. For current shareholders, it may make sense to hold on to their shares but not buy more until valuations cool. On the other hand, there is no compelling reason to sell the stock at the moment.
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Pros:
- Disruptive economic model
- Robust revenue growth
- Planned expansion of tools and services
- Disruptive economic model
- Robust revenue growth
- Planned expansion of tools and services
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Cons:
- High Valuations
- Increased competition
- Macroeconomic risks
- High Valuations
- Increased competition
- Macroeconomic risks
- Disruptive economic model
- Robust revenue growth
- Planned expansion of tools and services
- High Valuations
- Increased competition
- Macroeconomic risks