Cathie Wood often invests in speculative companies whose profits are years away, even if You’re here (TSLA) has been profitable for years. Thus has Shopify (SHOP), one of Ark Invest’s top 10 holdings. Thanks to a strategic shift, Shopify’s earnings growth is set to soar in 2023, with strong gains continuing into next year. And the SHOP stock is close to a buy point.
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Shopify Logistics Sales
Shopify announced the sale of its fulfillment business to privately held Flexport on May 4, with the transaction closing in June. The e-commerce software giant had sought in recent years to challenge Amazon.co.uk (AMZN) in third party processing for online orders. But it turned out to be an “expensive experiment”.
Shopify now owns a 13% stake in Flexport, but the logistics exit will mean the company can cut costs. Meanwhile, gross commodity growth is picking up after slowing sharply following the coronavirus pandemic boom.
Shopify Earnings
Shopify’s earnings plunged to 4 cents per share in 2022 from 64 cents in 2021. The end of the pandemic has caused a significant slowdown in e-commerce growth.
First-quarter earnings, released May 4 with the Flexport deal, fell 50% from a year earlier. Sales increased 25% to $1.51 billion.
But following the Flexport deal, analysts said they expect Shopify’s full-year earnings per share to rise 772% to 35 cents, with another 63% jump in 2024 to 57 cents.
Stock market forecast for the next six months
SHOP
Shopify’s stock rose 24% on May 4 after first-quarter results and the Flexport deal, coming off a cup-with-handle base. After peaking at a 52-week high of 65.54 on May 10, stocks have started to consolidate. SHOP’s stock briefly hit a new 52-week high in mid-June, but pulled back along with the broader market.
This Cathie Wood stock again found support at the 21-day line. Investors could still use 65.64 as a starting point or add to a Shopify trading position. The risks would be high if the market decline continues.
Pile Ark Invest
Ark Invest owns 0.69% of Shopify shares as of June 23. It is the 8th largest holding among Cathie Wood’s Ark ETFs, with an overall weighting of 3.85%.
While SHOP stock was a big winner for Ark Invest in 2023, its current position is still underwater. ARKK, ARKW and ARKF funds have an average cost of $121.32 to $128.27.
It’s not uncommon. Ark Invest is making a big profit in its current holdings of Tesla shares. But Cathie Wood’s other top 10 equity positions are currently losing, with some more than 75% below Ark’s cost base.
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