Why Shopify Stock Is Down 76% So Far in 2022
Shares of Shopify (NYSE: SHOP) are down by 75.8% so far in 2022, according to data from S&P Global Market Intelligence. The e-commerce technology expert entered this year with a full head of steam. Share prices had gained 895% over the previous three years and the stock was trading at 683 times trailing earnings or 387 times free cash flow. That lofty valuation was overdue for a correction, which arrived with a vengeance as investors started to worry about geopolitical tensions and rising inflation rates.
Inflationary pressure on the consumer market comes with both positive and negative effects on Shopify's business prospects. On the upside, many e-commerce vendors offer their products at lower prices than their brick-and-mortar rivals, attracting more shoppers when budgetary belts are tight. However, Shopify's profit margin is razor-thin even in the best of times, so anything that weighs on that skinny profit line can be painful in the short term.
As a result, Shopify's business results haven't done much to alleviate the macroeconomic market pressure. Top-line growth is running at the slowest rates in the COVID-19 era, and both earnings and free cash flow are trending downward. In fact, Shopify's last three earnings reports printed the adjusted bottom-line numbers in red ink. Before that painful streak, the company had only reported negative earnings in a single quarter since going public in 2015.
Source Fool.com
