Shopify Inc (TSX:SHOP) (NYSE:SHOP) is starting to rise again after seeing some bearish activity after it released a disappointing guidance earlier this week. Although its sales were up 68% in its most recent quarter, the company expects that to slow down for the remainder of 2018, which had investors concerned that Shopify was starting to run out of steam.
However, since reaching a low of around $153, the stock has gained momentum and on Thursday closed at over $173. Year-to-date the stock is up more than 30% but it still far away from the highs of over $200 that the share price reached earlier this year.
The problem with Shopify is that it continues to post losses and there’s no light at the end of the tunnel. Its net loss grew by more than 14% last quarter and there’s no reason to expect that to change anytime soon.
The share price is trading at an expensive eight times its book value and it’s not a stock that’s suitable for value investors. Even growth investors might be having second thoughts as well now that the stock’s growth is in question.
That being said, a growth rate of nearly 70% is still strong, there’s no question about that. However, if a company’s unprofitable, it has to prove its worth through other means, and that’s typically through strong revenue growth. Shopify might be a risky stock to invest in today because if the company sees a big dip in earnings next quarter then we could see an even bigger sell-off take place.
