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Shopify (TSX:SHOP)(NYSE:SHOP) stock is a far cry from the incredible growth stock it was when it first went public. Its momentum gained on the stock exchange since its debut on TSX was a testament to a thrilling growth story that has been more successful than many in North American equity security markets.
The stock has been one of the worst performers for many months due to the tech sector crash and other macroeconomic factors. Shopify has one of the best track records among publicly traded companies. However, its performance has become too volatile to be considered safe investments for stock market investors looking for safer investments.
The company’s prolonged downturn has made it an even riskier investment in a market environment where inflation is rampant and interest rate hikes slow economic growth.
Shopify stock’s downward momentum has cooled off, and its price movement on the TSX has become more horizontal in the last few weeks. There are more reasons to be concerned about Shopify stock’s current levels.
Amazon.com (NASDAQ:AMZN). The It is a force to reckon with in the ecommerce space. Its size and economic strength make them the dominant presence in the industry. And it is preparing to regain its market share for small- and medium-sized business (SMBs), in the ecommerce industry.
Shopify was able to take on the giant earlier and make a niche for itself in the ecommerce market. However, it was a difficult feat to accomplish — something that seems impossible right now, considering the financial strength of the American company and its growing popularity.
Amazon Prime customers enjoy many benefits that make them loyal, and Amazon is planning to launch a service that will bring more merchants to its platform than Shopify.
The Canadian tech sector’s darling stock did acquire Deliverr, an order fulfillment firm that can help Shopify compete with Amazon. The US$2.1 billion deal may not be enough to keep Shopify competitive with Amazon. To increase its capital investments in order to fight Amazon better, Shopify will need to make more sacrifices. This might not be a good idea for investors.
Amazon’s latest offering has put it in a position to reassert its dominance in the e-commerce industry and made it a more attractive platform for SMBs to consider. Amazon may be able to take on Shopify, a much smaller competitor, by challenging it. However, it remains to be seen how Shopify’s efforts to counter Amazon’s new service will play out.
At the time of writing, Shopify stock traded at $40.17 per share. This is almost 82% lower than its 52-week peak. If you are bullish on Shopify’s long-term prospects, it could be a steal at its current levels. But, it’s not a bargain. undervalued stock Right now
Despite the steep decline in its stock price, it trades for a 280.52 cost-to earnings multiple and 9.31 sales. Shopify may be too costly to invest in considering the risks.