Shopify: Stock Split Gimmick Didn't Work

 

• Shopify completed a 10-for-1 stock split this week.
• The e-commerce platform finds the stock trading at 52-week lows despite forecasts for 20% to 30% growth rates going forward.
• The stock valuation is far more reasonable at 4x EV/S, but the retail shakeout needs to end before investing here.
• This idea was discussed in more depth with members of my private investing community, Out Fox The Street. Learn More » 

Shopify (NYSE:SHOP) shareholders found out the hard way this week that stock splits aren't much more than financial gimmicks. After several large cap tech companies successfully split shares in the last year, the e-commerce platform executed a large share split and the stock has continued on to recent lows. My investment thesis is more Neutral on Shopify until the retail shakeout ends, but the stock valuation is definitely more appealing here with the stock down over 80% from the highs.

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Update - July 26

Tough times here requiring a 10% layoff... lets see if the lows hold.

-In an internal memo cited by Wall Street Journal, Shopify (NYSE:SHOP) indicated that it plans to cut ~1K or 10% of its global workforce across all its divisions as it pulls back on e-commerce growth forecasts it had seen amidst the pandemic.
-Layoffs will occur mostly in recruiting, support and sales units. "We’re also eliminating over-specialized and duplicate roles, as well as some groups that were convenient to have but too far removed from building products," founder & CEO Tobi Lütke commented.