The share price of Canadian technology leader Shopify has declined 48% to $1,110.40 as the market rout in technology stocks and companies that thrived during the pandemic intensifies.
Since hitting a peak last November, Shopify’s stock price has been almost cut in half, leaving shareholders reeling and shaking the Toronto Stock Exchange (TSX), where the shares hold an outsized weighting.
Shopify is likely to continue getting hit as investors shed stocks that have high price-to-earnings ratios (P/E). Shopify’s P/E ratio (the amount of money shareholders would need to invest to receive one dollar of the company’s earnings) sits at 226, which is much higher than the TSX’s average P/E ratio of 19.
Shopify’s growth was already on an upswing in recent years, but exploded during the COVID-19 pandemic, when lockdowns forced many retailers to begin selling their products online.
However, as vaccines become more widespread and in-person shopping returns, some investors and analysts are questioning whether the company’s growth can continue.
Last Friday (January 21), Shopify shares fell deeper into negative territory after it was reported the company ended a contract with multiple warehouse and fulfilment partners, in a possible signal it could look to bring more of its inventory management and logistics services in-house.
