Shopify Inc. stock experienced its most significant drop on Wednesday as the eCommerce giant warned that growth has slowed from the pandemic high of 57%. They mentioned record-raising inflation and consumer spending as key factors influencing the slowing growth in 2022. Their stock is down almost 50% over the past 12 months on a higher time frame.
There is a nervousness in the markets currently around payment processors as the rising inflation could negatively influence online spending. This has affected many of the tech giants such as Paypal, and Shopify is not exempt from this.
Shopify was one of the darling stocks during the Covid pandemic, with customers flocking to online stores due to the worldwide lock-down. Investors are now becoming weary of holding the stock now that the previous growth is running out of steam. Contributing to this slow down is the world returning to normal and the Federal Reserve reducing stimulus and increasing rates.
Betting Big on Warehouses and Delivery
The Canadian giant is making changes to many areas of its business, especially warehousing and the delivery network. On Wednesday, after the earnings call, it announced that they plan to significantly grow and consolidate the Shopify Fulfillment Network to help take on the likes of Amazon. It aims to increase its capacity to not only match the volume but also provide a higher quality service when it comes to delivery.
They will spend over $1 billion from 2023 to increase the company-owned, and partner warehouses, with the ultimate goal of taking on Amazon's aggressive delivery times. Their goal is ambitions with the company stating that they will be able to offer two days or less shipping to 90% of America's population.
$1 billion might sound like a lot of money, but it pails in comparison to what Amazon has in its war chest.