E-commerce giant Shopify Inc (TSX:SHOP)(NYSE:SHOP) finished last week at less than $765 per share as it continues to be at lows not seen since the early stages of the pandemic. In just six months, the stock has plummeted more than 60%. By comparison, online retailer Amazon.com (NASDAQ:AMZN) has also struggled, but it has fallen by a much more modest rate of 15% during that time frame.
Shopify’s stock took a big hit after it released earnings last month. Although revenue of $1.4 billion for the last three months of 2021 rose by more than 41% year over year, the company cautioned that future numbers may not be as strong. In 2022, Shopify stated that its sales growth will be less than the 57% increase in revenue it achieved this past year.
The business has benefitted from restrictions, lockdowns, and surges in online shopping due to the pandemic. In a return to normal for the economy, Shopify could face headwinds while also going up against some tough comparables from a year earlier.
The question for investors, however, is whether the stock is cheap enough to buy. Today, it trades at a price-to-sales multiple of less than 17. It hasn’t been trading at that low of a premium since 2019. Long term, e-commerce is likely only going to grow, and so if you’re willing to hang on for years, buying Shopify could be a great move. But in the short term, it wouldn’t be surprising for the stock to fall further down as its valuation still looks high.