The Shopify stock price has wavered this month as investors watch the upcoming earnings and the new developments on trade, especially between the US, China, and Canada. SHOP was trading at $94.50 on Wednesday, down by over 27% from its highest level this year.
The US trade war will impact Shopify’s business
Shopify is a technology company that offers a software platform that enables users to create and run their e-commerce platform solutions easily. The alternative of nit using its product is to build an e-commerce website from scratch, which is expensive and time-consuming.
Shopify hosts businesses of all sizes, including many that are in the Fortune 100. However, most of the companies in the platform are small and medium enterprises, especially in the United States of America (USA). It also hosts many dropshippers who buy products in China and sell them in the country.
The recently announced tariffs on Chinese goods will have a negative impact on these businesses, which will see their operational costs surge and sales slow. That’s because the US has implemented a 145% tariff on most goods coming from China.
Analysts believe that many small businesses that rely on Chinese suppliers will not survive these tariffs, which some US officials have termed as an embargo. In addition to the higher import costs, these firms will see weak sales as customers struggle with rising costs.
These factors will affect Shopify because of how it makes money. In addition to the monthly platform access fees, the company also collects a small commission for all goods and services sold on its platform.
Fortunately, there are signs that the US will reduce the tariffs as the two countries start negotiating a trade deal on Saturday in Switzerland.
SHOP earnings ahead
The next important catalyst for the Shopify stock price will be the upcoming earnings, which will provide more information about its performance in the first quarter.
There is a likelihood that the company’s sales surged in the first quarter as more customers rushed to buy products ahead of the Liberation Day tariffs in April.
Yahoo Finance data shows that the average revenue will be $2.33 billion, up by 25.3% from the $1.86 billion it made in the same period last year.
Analysts also expect the average earnings per share will be 26 cents, up 20 cents for the same period last year. Odds are that the company’s results will be higher than estimates, as it has done in the past.
The annual revenue guidance is that its revenue will be $10.79 billion, up by 21.4 billion from 2024. These numbers will be impressive for a company that has been in business for many years.
Analysts are also optimistic about the Shopify stock price, with the average estimate being $116, up from the current $94.50.
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Shopify stock price analysis
The Shopify stock price often experiences high volatility after publishing its financial results. For example, it surged $54 to $67 when it released its numbers in August last year. It rose from $89 to $115 in the next report in November, while its performance in the last report was muted.
These numbers come after the SHOP stock has formed a bearish island pattern. This pattern is characterized by a cluster of candlesticks that are isolated from the previous price action. It is one of the most bearish patterns in the market.
Therefore, there is a likelihood that the stock will drop after its earnings, and possibly retest the important support level at $85. The bearish outlook will become invalid if the stock moves above the psychological level at $100.
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