Shopify (SHOP) has traded sideways in a $132-143 range since last week. While company-specific news has been limited, key developments during this short period include a strategic partnership with DHL for enhanced international shipping and Cathie Wood’s ARK ETFs trimming their SHOP positions, reflecting profit-taking after the post-earnings rally.
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In the meantime, Powell’s dovish Jackson Hole speech last week has shifted market focus toward potential monetary easing, with traders now pricing in an 87% chance of a 25-bps cut at the Fed’s September 16-17 meeting. This comes alongside ongoing tariff escalations, though, including 20% duties on Chinese imports and 25% on steel, aluminum, and automobiles, which could disrupt merchant supply chains.
I maintain my cautiously Bullish stock rating, as Shopify’s substantial revenue, GMV, B2B, and Offline growth outweighs the ongoing margin pressure amid a precarious macro environment. On the balance of risks and probabilities, SHOP stock is likely to maintain its recent uptrend, which began in April this year, from lows of approximately $70. How things have changed as the stock now trades at ~$140 per share.
Powell’s Rate Cut Hints Signal Boost for Consumer Spending
Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium last week marked a pivotal shift, emphasizing rising downside risks to employment and suggesting that “the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance.”
With the labor market showing an unusual balance (marked by slowing job growth to an average of 35,000 monthly additions over the past three months and an unemployment rate holding at 4.2%), Powell indicated that the Fed could proceed “carefully” toward easing, boosting expectations for a September rate cut.
Markets reacted swiftly, with stocks surging and Treasury yields falling, as the probability of a 25-bps cut jumped from 75% to 89% post-speech. If I am being honest, it felt that Powell downplayed long-term inflation risks from tariffs, viewing them as likely a “one-time shift in the price level” rather than persistent pressure, which would allow the Fed to prioritize employment under its dual mandate.
For Shopify, this potential easing is likely to translate into a significant tailwind. Lower interest rates would lower borrowing costs for consumers and merchants, stimulating discretionary spending on e-commerce platforms.
Notably, Shopify’s Q2 gross merchandise volume (GMV) already skyrocketed 31% to $87.8 billion, driven by categories like apparel and electronics, which are sensitive to consumer confidence, and so a rate cut could accelerate this trend even further, since it will encourage more online purchases due to easier credit access for big-ticket items.
Investor sentiment appears optimistic, with several Wall Street analysts noting that cheaper financing could spur small business expansion on Shopify and further boost merchant solutions revenue, which already grew 37% to $2 billion in Q2. Still, the Fed remains cautious, pointing to tariff uncertainty and the need for additional data before its September decision. Any delay could dampen this momentum, making the upcoming August jobs and inflation reports especially pivotal. We’ll revisit these developments once the data is released.
Tariff Escalations Pose Supply Chain Risks Amid Dovish Outlook
Now, despite the positive rate cut narrative, escalating U.S. trade policies under President Trump continue to loom large. Recent announcements of 20% tariffs on Chinese imports, which I view framed as “fentanyl tariffs” and part of reciprocal measures, and 25% duties on steel, aluminum, and automobiles are set to disrupt global supply chains, with effects potentially adding 0.5-1% to inflation by year-end.
For this very reason, some investors might end up fearing cost hikes for merchants reliant on Asian sourcing, particularly in electronics and apparel, which, by the way, were key drivers of Shopify’s 31% Q2 GMV increase. Powell acknowledged the visibility of these tariffs in consumer prices but suggested that their inflationary impact might be short-lived, allowing the Fed (conveniently so) to focus on labor risks without immediate hikes.
For Shopify, whose merchants often import from China (though only 4% of GMV is tied to de minimis exemptions), it’s fair to assume that this could raise input costs and compress margins, slowing the adoption of premium tools.
The counterpoint to this is that Shopify’s platform offers mitigation via AI-driven inventory optimization and partnerships, such as the DHL eCommerce integration earlier this month, which provides affordable international shipping to U.S. merchants, helping to diversify logistics amid tariff pressures. This aligns with Shopify’s 42% growth in European GMV in Q2, reducing U.S.-centric vulnerabilities. And again, while tariffs could dampen near-term transaction volumes, the anticipated rate cuts may offset this by spurring demand, so Shopify could easily adapt in a shifting macro landscape.
Is Shopify a Buy, Sell, or Hold?
Wall Street remains fairly bullish on Shopify, despite recent concerns around tariffs and supply chains, with the stock carrying a Moderate Buy consensus rating based on 20 Buy and 13 Hold recommendations over the past three months. Impressively, not a single analyst rates the stock a Sell. In the meantime, SHOP’s average stock price target of $163.96, relatively unchanged from last week, suggests ~14% upside from current levels.
SHOP’s Next Move Hinges on Jobs, Inflation, and the Fed
Today, Shopify finds itself at the intersection of monetary easing tailwinds and tariff headwinds. Powell’s dovish stance could unlock cheaper credit and stronger consumer demand, fueling growth in GMV and merchant activity. At the same time, escalating trade barriers threaten to squeeze the margins of sellers who are dependent on Asian imports.
For now, markets seem focused on the rate-cut narrative, but the upcoming August jobs and inflation reports will be critical catalysts ahead of the Fed’s September meeting—likely determining SHOP’s next move.