Shopify stock (NYSE:SHOP) has had another tough month, declining by about 23% since mid-September (about 21 trading days) compared to the S&P 500 which remains down by about 8% over the same period. Although there haven’t been too many developments specific to Shopify as a company in recent weeks, the macroeconomic environment looks challenging. Core U.S. inflation came in higher than expected for September touching 40-year highs and this is likely to cause the Federal Reserve to continue with its aggressive rate hikes. The central bank has raised the Federal Funds rate to over 3%, from just about 0.25% at the start of this year and another 0.75% hike looks very likely in November. Moreover, U.S. GDP has also contracted over the last two quarters with consumer sentiment remaining weak and this doesn’t bode well for the e-commerce sector. This is likely causing investors to further cut exposure to the high-growth, high-multiple stocks such as Shopify, which now remains down by around 80% year-to-date. Moreover, despite the current tough environment, Shopify has remained steadfast in its plans to build out its own distribution network to take on Amazon. This is likely to be a multi-year endeavor and could cost the company billions of dollars and this is also proving a drag on the stock.
However, now that SHOP stock has seen a decline of about 23% over the last month, will it continue its downward trajectory in the near term, or is a recovery imminent? Going by historical performance, there is a roughly 52% chance of a rise in SHOP stock over the next month. Out of 86 instances in the last 7 years that SHOP stock saw a twenty-one-day decline of 23% or more, 45 of them resulted in SHOP stock rising over the subsequent one-month period (twenty-one trading days). This historical pattern reflects 45 out of 86, or about a 52% chance of a rise in SHOP stock over the coming month, implying that the stock may not be a great bet for the near-term. See our analysis of Shopify Chance of Rise for more details.
Calculation of ‘Event Probability’ and ‘Chance of Rise’ using last seven years’ data
- After moving -4% or more over five days, the stock rose in the next five days on 57% of the occasions.
- After moving -3% or more over ten days, the stock rose in the next ten days on 52% of the occasions.
- After moving -23% or more over a twenty-one-day period, the stock rose in the next twenty-one days on 52% of the occasions.
|S&P 500 Return||0%||-25%||60%|
|Trefis Multi-Strategy Portfolio||-2%||-28%||187%|
 Month-to-date and year-to-date as of 10/17/2022
 Cumulative total returns since the end of 2016
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