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Shopify Crashes After Earnings: Should You Buy the Stock?

Shares of Shopify (TSX:SHOP)(NYSE:SHOP) fell last week after the e-commerce company reported its latest earnings numbers. Despite generating strong overall results, investors weren’t thrilled with the company’s outlook.

For the three-month period ending March 31, Shopify reported revenue of $1.9 billion, which grew at a rate of 23%. And that growth rate is 29% after adjusting for the sale of its logistics business. Shopify also posted an operating profit of $86 million compared with a loss of $193 million in the prior-year period.

But for the current quarter, the company expects a slower growth rate that it says will be in the high teens, and when adjusting for its logistics business, it will be in the low-to-mid twenties. It’s a slower growth rate than in the first quarter, and that has raised concerns for investors, sending the stock down after the press release.

While Shopify isn’t at a new 52-week low, it is trading around the levels it was at in October of last year. The stock is still struggling to rebound after a massive selloff in 2022 when inflation and rising interest rates made investors bearish on tech stocks like Shopify. While the e-commerce company has been demonstrating good growth over the years, consistent profitability remains a problem for the business and it has been slashing costs in order to improve its financials; it’s currently trading at a forward price-to-earnings multiple of more than 60.

The selloff, however, could make for an intriguing buying opportunity for long-term investors. E-commerce is likely to continue growing for years and with Shopify a big name in the industry, buying the stock at a reduced price could set investors up for some good gains in the long run.