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Shopify stock price slump: Can management shake-up turn around SHOP shares?

13:33, 23 September 2022

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  • AMZN
    Amazon
    113.19 USD
    -1.63 -1.420%

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A Shopify storefront in Germany
Shopify shares have plunged more than 92% due to a post pandemic slump in e-commerce – Photo: Getty

Shopify's (SHOP) share price has dropped a staggering 92% since the end of June this year,and is currently trading at about $28.50.

The company has recently come under scrutiny for a number of reasons, not least its ongoing beef with Amazon (AMZN) as well as certain management changes.

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Shopify (SHOP) shares have plunged 92% in the last three months 

What management changes is Shopify (SHOP) seeing?

Shopify (SHOP) has recently appointed Jeff Hoffmeister from Morgan Stanley (MS) as its new chief financial officer (CFO) and promoted Kaz Nejatian to the role of chief operating officer. This comes following a slew of job cuts announced by the company back in July, which has seen about 10% of the job force being let go: approximately 1,000 employees.

These new appointments, as well as earlier job cuts, are part of a revised strategy being implemented by the company following a miscalculated estimate that e-commerce would continue to be buoyed by the pandemic wave. This was admitted by Shopify’s CEO Tobi Lutke, in a note on the company’s blog.

Why are Shopify (SHOP) and Amazon (AMZN) at loggerheads recently?

Shopify has been warning merchants against using Amazon's (AMZN) “Buy with Prime” function, claiming that it violates the former’s guidelines and that the function is insecure. Shopify has also gone so far as to claim that Amazon’s function could cause leaks in customer data and security issues, also emphasising that it cannot help support merchants who use it, in case of fraudulent orders.

However, the issue goes deeper than this. Amazon’s “Buy with Prime”, competes directly with Shopify’s own checkout and payment service, Shop Pay, which the company has been trying to broaden with Google and Facebook deals. Thus it is quite likely that these warnings are an attempt to direct more consumers to its own payment feature.

AMC

6.98 Price
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Long position overnight fee -0.0308%
Short position overnight fee -0.0137%
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AMZN

113.19 Price
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Short position overnight fee -0.0059%
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AAPL

138.07 Price
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Long position overnight fee -0.0064%
Short position overnight fee -0.0059%
Overnight fee time 21:00 (UTC)
Spread 0.05

What is the outlook for Shopify (SHOP) share price?

Although investors are understandably concerned about Shopify’s nosedive in recent weeks, the company has highlighted that it is much more focused on product building teams now, having let go of teams which were too far removed from core products.

The company has also offered employees more say in the way their compensation is structured, between cash and equity, in order to hopefully invite new and better talent. This, alongside the appointment of Jeff Hoffmeister, who used to head the technology investment banking group at Morgan Stanley, has gone some way in reassuring investors that the company is headed towards better days.

This is reflected by Royal Bank of Canada analysts, who have given Shopify an outperform rating and a price target of $60 for the near term, maintaining that the company has one of the “most compelling growth stories”.

However, Morgan Stanley analysts are a little harder to convince, having slashed the company’s price target down from $44 to $40 and maintaining an Equal Weight (neutral) rating.

Thus, it remains to be seen whether Shopify can satisfactorily pull itself up from the post-pandemic e-commerce slump in the coming few months.

Further reading

What You Need to Know

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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