Since Shopify (SHOP) delivered its impressive Q2 earnings just about two weeks ago, the stock has held most of its post-earnings gains despite a turbulent macro backdrop. At current prices, the stock has shed 7% since last week but is holding above its key $118 handle, below which further losses could unravel. No major company-specific news has broken in recent days, but fresh U.S. inflation data and trade policy developments are shaping the broader environment for Shopify’s merchant-driven business.
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The July CPI report, released August 12th, showed inflation is still hanging around, which could weigh on both consumer spending and supply chain costs. Even so, Shopify’s momentum (especially with its push into international markets) keeps strengthening the long-term story. Thus, I maintain my cautiously Bullish stock rating, as Shopify’s adaptability and growth catalysts outweigh near-term economic pressures.
Sticky Inflation Signals Consumer Spending Risks
Last week’s CPI report from the Bureau of Labor Statistics revealed that headline inflation held steady at 2.7% year-over-year in July, matching June’s rate but falling just below the 2.8% expected by economists. On a monthly basis, prices rose 0.2%, driven largely by a 0.2% increase in shelter costs, while food prices were flat and energy prices dropped 1.1%, with gasoline declining 2.2%. Core CPI, which excludes volatile food and energy, rose 0.3% month-over-month and 3.1% year-over-year, marking the highest annual core rate since February.
Sticky inflation poses a risk to consumer discretionary spending, a critical growth engine for Shopify’s small and medium-sized business (SMB) merchants. Core goods inflation has reached a two-year high, with tariff-driven price increases in household furnishings (+0.7%) and apparel (+0.1%) likely to dampen demand for non-essential goods.
It feels like investors are picking up on the same concern, pointing out that more people are leaning on debit cards instead of credit—maybe a sign that shoppers are getting more careful with their spending. For Shopify, that matters. Their Q2 gross merchandise volume jumped 31% to $87.8 billion, but if consumer spending slows, especially in areas like fashion and electronics, that kind of growth could be harder to keep up.
But then again, let me remind you that Shopify’s platform versatility offers a buffer. Shopify’s Q2 strength came from non-discretionary areas like health, beauty, and pet supplies, showing that merchants are adjusting as shoppers focus more on essentials. Tools like Sidekick and the Universal Cart are playing a role here too, giving merchants more innovative ways to manage pricing and inventory so they can keep sales steady, even with customers pulling back a bit because of inflation. While consumer spending risks are real, Shopify’s data-driven ecosystem positions it to support merchants through economic turbulence.
Tariff Pressures and Supply Chain Challenges
CPI data also highlighted early signs of tariff-related price increases, with economists noting that President Trump’s trade policies are starting to filter through to consumers. Core goods prices rose 0.2% for the second consecutive month, a departure from their typical flat or declining trend, with tariffs contributing to higher costs for imported goods like furnishings and recreational products.
I have seen credible comments on social media suggesting producers are absorbing some tariff costs for now, but as stockpiles dwindle, more price hikes may hit consumers. For Shopify merchants, particularly those reliant on Asian imports, rising input costs could squeeze margins, potentially slowing adoption of Shopify’s premium subscription tiers.
After all, Shopify’s latest earnings call downplayed tariff exposure, with management noting that only 4% of its global GMV relies on de minimis exemptions targeted by recent trade policy scrutiny. Still, broader tariff impacts could raise costs for merchants sourcing from China, a key supplier for many SMBs.
Another point to note regarding this issue is that Shopify’s partnerships with Amazon’s (AMZN) “Buy with Prime,” PayPal (PYPL), and Klarna help mitigate this by streamlining fulfillment and offering flexible payment options, which can offset shipping cost hikes. In the meantime, its 42% GMV growth in Europe also reduces dependence on tariff-sensitive regions, so while trade disruptions pose a risk, Shopify’s logistics integrations and geographic diversification provide resilience.
Is Shopify a Buy, Sell, or Hold?
Wall Street remains relatively bullish on Shopify, despite recent concerns around inflation, with the stock carrying a Moderate Buy consensus rating based on 19 Buy and 14 Hold recommendations over the past three months. Notably, not a single analyst rates the stock a Sell. SHOP’s average stock price target of $163.41, up about $2 from last week, suggests ~19% upside from current levels.
Balancing Near-Term Risks With Long-Term Growth in Shopify
Shopify remains well-positioned to navigate the current economic turbulence. While inflation and tariffs may pressure both consumer demand and merchant margins, the company’s adaptability—whether through AI-driven tools, international expansion, or steady demand for essentials—continues to be its core strength.
Near-term headwinds could lead to volatility, but Shopify’s long-term growth drivers outweigh the risks. At current levels, the stock still appears reasonably valued.
To take advantage of the backdrop, I’ve been selling puts during periods of weakness, capitalizing on elevated option premiums. If the stock rallies, the premium income is retained; if it declines, I can accumulate shares at a lower effective cost. This provides a disciplined way to establish exposure while preserving a wider margin of safety.