Will an eBay Inc. Partnership Take Shopify Inc. Into the Stratosphere?

What does Shopify Inc.’s (TSX:SHOP)(NYSE:SHOP) recent deal with eBay Inc. (NASDAQ:EBAY) mean for shareholders?

| More on:

In the most recent development in the growth story that is Shopify Inc. (TSX:SHOP)(NYSE:SHOP), the e-commerce technology company has announced a partnership with eBay Inc. (NASDAQ:EBAY) in which Shopify merchants will be able to sell their goods to eBay customers — a move that has apparently not helped boost the share price of Shopify at all. Shares slid nearly 4% last week following the news.

On one hand, the market’s reaction to this agreement may seem shocking considering the sentiment of investors following similar deals in the past, such as the all-important Shopify-Amazon.com, Inc. deal, which propelled shares into the stratosphere. On the other hand, said price appreciation seems to have gotten out of control, and the negative momentum that Shopify’s shares have experienced of late can likely be attributed to investors taking money off the table.

While the growth runway for Shopify remains extremely long, and some tech investors are already calling Shopify the next Amazon (let’s not get too far ahead of ourselves, shall we?), a coherent argument can be made that despite the extremely high valuation supported by a lack of earnings, other famed high-flying tech stocks have simply appreciated more and faster over time. In other words, the greater Fool thesis is alive and well in today’s technology market, and an investor need not worry about the intrinsic value of a company’s shares, but rather, how much one can expect to receive for those shares from another investor who will want them more?

The other, more conservative, side of the argument centres on the idea that Shopify’s growth projections have gotten out of control, and a sustained dip (or at least leveling off) of Shopify’s bloated share price is warranted over the near to medium term.

Bottom line

With many early investors looking to realize some of the impressive growth that Shopify shares have seen of late, it is understandable that Shopify’s stock price has traded somewhat sideways of late. This most recent announcement, however, is likely to add more fuel to the fire for investors considering Shopify as a long-term play.

Shopify’s growth prospects are second to none in today’s market, but at some point, investors are going to demand to see profitability and will want to see Shopify grow without additional equity raises. Such a timeline is likely a few years out, and it may make sense for conservative investors to wait until bottom-line profit numbers come in before jumping in to this name, given Shopify’s status as a glamour stock at the moment.

Stay Foolish, my friends.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any stocks mentioned. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Amazon, eBay, Shopify, and SHOPIFY INC. Shopify is a recommendation of Stock Advisor Canada.

More on Tech Stocks

dividend growth for passive income
Tech Stocks

2 Canadian Growth Stocks Set to Skyrocket in the Next 12 Months

There are some great growth stocks out there for investors to consider, but of them all these two look like…

Read more »

A small flower grows out of a concrete crack.
Tech Stocks

Got $3,000? 2 Monster Growth Stocks to Buy Right Now Without Hesitation 

Here is a method to identify monster growth stocks in which you can invest $3,000 and let your money grow…

Read more »

hand stacks coins
Tech Stocks

2 Stocks That Could Turn $100,000 Into $1 Million

When it comes to winning growth stocks, these two have made millionaires time and again.

Read more »

AI microchip
Tech Stocks

2 Canadian AI Stocks Poised for Significant Gains

If you are looking to ride a decisive bull market phase from the beginning, discounted AI stocks in Canada might…

Read more »

Woman in private jet airplane
Tech Stocks

Could This Undervalued Canadian Stock Be a Millionaire-Maker? 

Futuristic growth stocks can be your ticket to millionaire status.

Read more »

Canada Day fireworks over two Adirondack chairs on the wooden dock in Ontario, Canada
Tech Stocks

Best Tech Stocks for Canadian Investors in the New Year

Three tech stocks are the best options for Canadians investing in the high-growth sector.

Read more »

doctor uses telehealth
Tech Stocks

What to Know About Canadian Small-Cap Stocks for 2025

Small cap stocks are a great way to experience outsized gains. Here is what you need to know about small…

Read more »

A worker drinks out of a mug in an office.
Tech Stocks

A Top-Performing U.S. Stock That Canadian Investors Really Should Own

Canadian investors should buy and hold this top performing U.S. stock for generating significant returns in the long run.

Read more »