Shopify has historically delivered outsized returns for investors.
Regarding the performance of Shopify (SHOP 0.40%), most of its long-term investors are likely happy with it. A $1,000 investment made on the day of the May 2015 initial public offering (IPO) is now worth around $60,000.
Unfortunately for some of its investors, succeeding by investing in Shopify stock has been a question of timing, and its five-year shareholders may be less than happy with the stock’s returns. Here’s why.
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Shopify’s five-year performance
Over the past five years, Shopify’s stock has been up 58%. While that may sound like a decent return, it falls short of the S&P 500, which more than doubled over the same timeframe.
Today’s Change
(-0.40%) $-0.64
Current Price
$158.70
Key Data Points
Market Cap
$207B
Day’s Range
$157.88 – $160.57
52wk Range
$69.84 – $182.19
Volume
179K
Avg Vol
8.3M
Gross Margin
48.57%
Dividend Yield
N/A
Shopify’s five-year shareholders owned the stock through the worst period in its history. If one bought in November 2020, the stock rose 60% in the first year.
Nonetheless, a combination of the 2022 bear market and a move into shipping and fulfillment returned Shopify to losses, and the stock fell by as much as 87%.
Fortunately, by the beginning of 2023, the bear market was ending. Moreover, Shopify decided it was a mistake to try to build a fulfillment network and sold it to Flexport in June 2023. This allowed Shopify to return to profitability, and investors again began bidding the share price higher.
The importance of other perspectives
However, investors should judge Shopify by its overall history rather than by one period.
Despite the aforementioned five-year performance, investors should remember two facts. First, Shopify’s ability to admit mistakes. When it saw how the cost of building the fulfillment network devastated the company’s financials and the stock, the company acknowledged it could likely not bear the cost of running such a network and exited this business.
Just as importantly, that move brought Shopify’s focus back to its core competency in software, and it still had an extensive ecosystem that helped it retain its competitive advantage over most other e-commerce platform ecosystems.
Secondly, the 2022 bear market remains the only sustained pullback in the stock’s more than 10-year history. In every other instance, Shopify’s sell-offs were comparatively shallow, and the stock typically recovered within a few months or less.
Now, with revenue and profits continuing to rise, another sustained sell-off like the one in 2022 looks increasingly unlikely.
Shopify stock remains a buy
Despite Shopify underperforming the market over the last five years, Shopify stock has been and will likely remain good for investors.
Admittedly, investors who bought five years ago dealt with a brutal bear market sell-off and a return to losses from a strategic misstep.
Fortunately, such instances are rare, and the stock significantly outperformed the market over most time periods. With revenue and profits continuing to grow, its outperformance could likely continue, even if investors buy the stock at a short-term peak.