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How Much Shopify Stock Is Safe To Own?


By Karl Anvik, BSc, MA, CIM®, CFP®


As an emerging competitor to Amazon, Shopify has become increasingly popular with tech sector investors in the last few years. This growth has been magnified during the pandemic as traditional brick-and-mortar retail stores have shifted to online sales and have started to rely more heavily on online platforms.


In its most recent report to investors, Shopify reported a revenue of $978 million, an increase of 94% over the previous year. Shopify executives also reported a sharp increase in the number of merchants using the platform, reporting in February that the merchant solutions revenue increased by 117%.


However, what has made this stock particularly interesting in 2021 is that the share price dropped 30% from its 52-week high after Shopify told investors during that call that consumer spending could “rotate back” to traditional brick-and-mortar retail. (1)


With its sharp rise in popularity over the last year and then a quick downturn in the first quarter, many investors have been wondering how much Shopify stock is actually safe to own. It’s important to remember that every individual portfolio and every investor is different. So what works for your friend or family member likely won’t have the same intended result for you. In general, we recommend not having more than 5% of your total portfolio in any single stock.

Be careful not to make changes to your wealth management strategy without first talking to a professional. That being said, if you are considering re-examining your tech stock portfolio, here are a few points to keep in mind.


Online Retail Is Here To Stay

Even as more and more people become fully vaccinated and start venturing out of the home to conduct their shopping, increasing brick-and-mortar shopping in the near future, the truth is that online retail is now embedded as a convenient choice for consumers.


The pandemic accelerated a process that was already years in the making. Consider the decline of big chain department stores and the epidemic of abandoned shopping malls across the continent. The prevalence of this type of shopping environment has been steadily declining for at least two decades, while the rise of online retailers and marketplaces, like Amazon, has been steadily increasing for years and experienced a sharp escalation due to the pandemic curtailing traditional shopping experiences.


So any investment in Shopify should be seen as a long-term commitment. Fluctuations due to extenuating circumstances, such as the pandemic and the subsequent availability of a vaccine, are the exception and not the rule, and will not likely have a steep influence on Shopify’s overall performance over an extended time period.


Shopify, Amazon, And Antitrust

In January, Amazon acquired Selz, an Australian competitor to Shopify. (2) While Amazon has bought dozens of companies without too much pushback from American antitrust regulators, this doesn’t mean that Amazon will escape severe repercussions in the future.


Many U.S. lawmakers continue to condemn the “monopoly power” of the American tech giants, including Amazon, and have called for sweeping changes of the U.S. antitrust laws to establish a more competitive landscape. After a 16-month investigation, Democrats on the House Judiciary Committee proposed policies that would break up tech giants and block the companies’ attempts at purchasing other smaller startups or established retail companies. (3)


While this doesn’t affect Shopify on its surface, as a smaller competitor to Amazon, it may mean that in the future Shopify will be able to achieve more stable growth while Amazon grapples with antitrust roadblocks. This underscores our point that Shopify stocks should be considered a long-term rather than short-term investment strategy.


Questions About Your Portfolio?

If you are reconsidering your investment in Shopify or the tech industry, we can help you review your portfolio. We strive to offer the best tools and services in the industry and can help you design a stable investment strategy that will support your wealth management plan well into the future. Call 403-571-8960 or email info@northfront.com for more information.


About Northfront Financial

Northfront Financial, based in Calgary, Alberta is a boutique full-service financial planning firm serving professionals and business owners. We pride ourselves on being a different kind of investment firm. This stems from our humble roots, entrepreneurial spirit, and a culture of integrity and professionalism. Our goal is to offer the best investment products, services, advice, and ideas the financial industry has to offer from our experienced team, which includes individuals with the Chartered Financial Analyst (CFA), Chartered Investment Manager (CIM), and Certified Financial Planner (CFP) designations. To learn more about Northfront Financial and how we can help you, visit our website and schedule a complimentary appointment.

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(1) https://www.fool.com/investing/2021/02/17/shopify-pulls-back-on-earnings-beat-cautions-about/

(2) https://sites.law.berkeley.edu/thenetwork/2021/03/17/shopify-amazons-antitrust-counterargument/

(3) https://www.nytimes.com/2020/10/06/technology/congress-big-tech-monopoly-power.html

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