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SHOP Stock: Why Are Investors Experiencing High Volatility with Shopify?


The pandemic boosted Shopify’s (TSX:SHOP) business, but the first quarter of 2021 has not brought about exciting news for investors and the stock has lost over 22% value in March alone.

Shopify has been a pioneer in simplifying e-commerce. It has streamlined the process for merchants by allowing them to build not only their stores but also manage inventory and payment processing seamlessly.

With e-commerce gaining a lot of traction over the years, Shopify has enabled aspiring businesses to conduct business seamlessly.

But what is the reason behind the volatility in Shopify’s stock prices, and is it worth buying? This article will help you decide.

Reasons for volatility in SHOP stock

Here are the reasons for investors experiencing high volatility with Shopify stocks-

Shopify is unlikely to emulate the previous year’s success

The Canadian brand re-emphasized that it expects to expand into new markets and speed up innovation in 2021. The management also harped on making the most of available opportunities and expects rapid growth in revenues throughout the year.

But Shopify was clear that the revenue trajectory will slow down in 2021 (compared to 86% growth where sales touched $2.93 billion in 2020).

In-person shopping is gradually clawing back

The coronavirus is still here and will take considerable time to disappear. But with governments relaxing lockdown norms, it has propelled people to wear their shoes again and go out shopping, although with more caution this time. It can result in Shopify’s revenues gradually slowing down, and the realization has caused the stock prices to tumble.

Amazon acquired Selz, the Shopify competitor

With more and more small and medium-sized merchants going the Shopify route, it was inevitable that Amazon would try to either build or acquire another business to compete with it. 

So did they by buying Selz, an Australian brand with a similar business model. When the news broke out, it caused a bit of unrest among Shopify investors, leading to higher volatility in its stock prices.

Should you continue investing in Shopify stock?

Shopify refrained from releasing any guidance for 2021 while announcing its results. It has cleared the air of uncertainty by mentioning that it expects a normalized growth pace in 2021 and beyond.

But with e-commerce gaining new grounds every passing day, there should be little for you to think while investing in Shopify stock. Yes, there is competition, but a steady and proven management are well equipped to handle near-term headwind.

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