Shopify Drops 2.94% After Loop Capital Downgrade

On Tuesday, during pre-market trading, the stock of Shopify, a company listed in the United States, experienced a decline of 2.94%. This drop occurred following the decision by Loop Capital to lower its rating for Shopify from "buy" to "hold" due to valuation concerns.

Loop Capital's analyst, Anthony Chukumba, clarified that the downgrade was primarily driven by valuation issues rather than a pessimistic outlook on the company's fundamentals. Despite the current valuation aligning with Loop Capital's optimistic projections, the firm is awaiting a more attractive entry point before resuming a more positive stance on the stock.

Shopify's recent financial performance shows a 27% increase in revenue for the first quarter of 2025, with a free cash flow margin of 15%. The company also reported significant growth in key areas, including a 23% increase in offline GMV and a 109% rise in B2B GMV. International GMV grew by 31%, and cross-border trade remained steady at 15% of GMV. Shopify Payments expanded to 16 new markets, nearly doubling its reach to 39 countries, enhancing merchant onboarding and payment processing. The Shop App experienced 94% year-over-year growth in native GMV, with Shop Pay GMV up 57%, processing over $22 billion.

However, there are some challenges. The gross margin for merchant solutions decreased to 38.6% from 40.1% in Q1 2024, impacted by factors such as the PayPal partnership. The expiration of the de minimis exemption for goods from China could potentially impact Shopify's cross-border trade, though currently only 1% of GMV is affected. Subscription Solutions gross profit grew at a slower rate than revenue due to higher cloud and infrastructure costs. The shift to three-month paid trials in certain markets may create comparability issues for MRR throughout 2025. The dynamic macro and trade environment, including tariffs, presents ongoing uncertainties that Shopify must navigate.