“I think this is a sign that the company is seeing some headwinds in its business and is choosing to take a more disciplined path to growth and profitability,” Tyler Radke, director of Citi Research, said in an interview.
Shortly before the layoff announcement, Radke cut his price target on Shopify shares in New York to US$37.00 apiece from US$43.20 amid concerns about what he called “a challenging demand landscape.”
“This company was growing almost triple digits in some quarters. And, you know, I think as investors we’re often guilty of extrapolating past trends into the future,” he said in the interview.
It was a sharp fall from grace for the company’s stock after its growth was supercharged in the early days of the pandemic. Shopify emerged as one of the TSX’s top performers in 2020, as its share price rose 178 percent over the year. But as COVID-19 restrictions eased and consumers resumed shopping in stores, the euphoria surrounding Shopify evaporated in a trend exacerbated by investors’ rapid shift away from growth stocks and as central banks began to raise interest rates. interest rates. By the close of trading on Monday, Shopify’s TSX-listed shares had lost 73% of their value this year.
“The economy can only grow at a certain rate for a long time. for short periods of time when there’s a huge stimulus in the system, you can get these growth hockey sticks that come about as a result of tremendous incentives from the government. That incentive has now been withdrawn, valuations have corrected dramatically,” Tom Marsico, managing director and chief investment officer of Marsico Capital Management, said in an interview.
He added that Marsico Capital Management, which had $2.54 billion in assets under management as of June 30, bought shares of Shopify early in the pandemic — and would take another look now that the stock has fallen so sharply.
“I think Shopify is a very well run company. Valuation is imperative at this level for more speculative accounts looking for long-term growth. So, would I be interested in creating a Shopify niche at these levels? Absolutely.”
