Ecommerce store shoppers

Even after the share of the share, the store stock is not a bargain

Source: Burdun Iliya / Shutterstock.com

Canada-based e-commerce platform Shopify (NYSE:STORE) made financial headlines late last month. However, it wasn’t for big accomplishments on Shopify’s part. Rather, it’s because the company has enacted a stock split for the store. It might sound intriguing, but that’s not reason enough 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 conducted stock splits in mid-2022. Still, this could be seen as a passing fad or perhaps even a gimmick to get retail traders to buy stocks because they are more affordable.

Keep in mind, though, that just because Shopify stock is more affordable doesn’t mean it’s actually a bargain. Price isn’t the same as value, and judging by Shopify’s financials, there just isn’t much shareholder value to be found with this company.

What’s going on with SHOP Stock?

On the surface, the split may have made store stock more attractive. After all, it is easier for retail investors to buy a stock that is in the $30 range than a stock that is priced at $300.

Notably, however, Shopify shares were already rapidly losing value before the split, as they had previously traded at $1,700 before dropping to $300. Given the stock’s rapid downward trajectory, the stock split might not even have been necessary or warranted.

Overall, it’s too early to assess whether the split had a positive or negative impact on SHOP’s stock. More important than that, however, is whether Shopify is a business worth investing in. On this, a strong argument could be made that Shopify’s best days are in the rearview mirror.

The times have changed

Of course, Shopify thrived in 2020 and part of 2021 thanks to Covid-19, as physical stores were closed and businesses rushed to set up storefronts online. As of mid-2022, however, brick-and-mortar stores are open. Additionally, rising inflation has put many buyers in a skimpy mood.

Indeed, the SHOP stock is the headliner of the hyper-growing stocks of 2020 and 2021 that sparkle this year. The data tells the story, as Shopify’s Q3 2021 revenue grew 46% year-over-year (YOY). In the fourth quarter, Shopify’s revenue increased by 41%, while in the first quarter of 2022, the company’s revenue increased by 22%.

So, we are seeing a slowdown in revenue growth with Shopify. The picture gets even bleaker when we look at the company’s bottom line. Shopify posted a net profit in the third quarter of 2021, but then posted a net profit loss of $371.3 million in the fourth quarter. Then, in the first quarter of 2022, the company’s net loss widened to $1.5 billion.

Conclusion on STORE stock

Times have changed, clearly, and Shopify is not adapting well. In other words, the catalysts that benefited Shopify a few years ago aren’t helping the business today.

It is extremely difficult to find good value in a company with declining revenues and no net profit. Therefore, it is wise to avoid the summer stock split mania and avoid SHOP stocks at all costs.

As of the date of publication, neither Louis Navellier nor the member of the InvestorPlace research staff principally responsible for this article holds (directly or indirectly) any position in the securities mentioned in this article.