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Shopify's (NYSE: SHOP) stock closed at its all-time high of $169.06 on Nov. 19, 2021. That 9,845% gain from its initial public offering (IPO) on May 21, 2015 would have turned a $1,000 investment into $99,447 in six and a half years. At the time, the e-commerce services provider dazzled the bulls with its accelerating growth throughout the pandemic, and the buying frenzy in meme stocks amplified its gains.
Over the following three years, however, Shopify's stock declined nearly 30%. It lost its luster as it lapped its pandemic-driven growth spurt, inflation curbed consumer spending, and rising interest rates popped its bubbly valuations. Let's see if that pullback represents a buying opportunity -- and if Shopify stock can head even higher over the next three years.
What happened to Shopify over the past few years?
Shopify's e-commerce platform helps merchants quickly set up online stores, manage their marketing campaigns, process payments, and fulfill orders. That approach makes it an appealing option for a merchant that wants to build its online presence but doesn't want to lock itself into a third-party marketplace like Amazon.
Shopify's initial growth was driven by smaller businesses, especially those that operated storefronts on social media networks. But the company is also locking in larger merchants with its Shopify Plus platform (which supports growing businesses), its Shopify Capital lending platform, and its consumer-facing Shop app. It drives those digital payments through its own Shop Pay platform.
Shopify's growth in gross merchandise volume (GMV), gross payment volume (GPV), and total revenue cooled off in 2022 as the pandemic-driven tailwinds dissipated, inflation worsened, and many of its retailers grappled with Apple's privacy-oriented changes on iOS. But in 2023, all three growth metrics accelerated again as the macro environment stabilized. It also launched new ad tools to counter Apple's iOS changes and make it easier for merchants to market their products.
| Metric | 2019 | 2020 | 2021 | 2022 | 2023 |
|---|---|---|---|---|---|
| GMV Growth | 49% | 96% | 47% | 12% | 20% |
| GPV Growth | 55% | 110% | 59% | 24% | 29% |
| Revenue Growth | 47% | 86% | 57% | 21% | 26% |
Data source: Shopify. Chart buy author.
In the first nine months of 2024, Shopify's GMV and revenue both grew 23% year over year. It stopped disclosing its GPV growth on a quarterly basis in the third quarter. Analysts expect its total revenue to grow 25% to $8.8 billion for the full year.
After posting a steep net loss in 2022, Shopify turned profitable again on a generally accepted accounting principles (GAAP) basis in 2023. It achieved that turnaround by divesting its capital-intensive logistics division, laying off thousands of employees, and trimming its other costs. Analysts expect its GAAP net income to rise nearly sevenfold to $1.3 billion this year.