Shopify (TSX:SHOP)(NASDAQ:SHOP) is a multinational e-commerce company that has benefitted from strong sales growth all over the world. It helps people sell products and services without even needing them to have their own website.
The problem is that with tariffs potentially weighing down economies all over the world, that growth could slow down, significantly. The U.S. has recently ended the de minimis rule that allowed low-priced goods to flow into the U.S. without incurring tariffs. And Shopify now cautions users that “duties and import taxes apply to all US imports, regardless of the value of the shipment.”
Oftentimes, the big incentive to buy things from online retailers, particularly in Asia, is because of those low-priced goods. But if tariffs are going to raise prices, that could impact demand. On the company’s most recent earnings call, Shopify’s management talked about consumers remaining resilient and that there haven’t been “any meaningful changes” thus far in cross border activity.
That suggests to me that Shopify may be in for some trouble in upcoming quarters, as it hasn’t yet felt the effects of tariffs, which looks to be inevitable. It’s currently forecasting a guidance in the mid-to-high twenties for revenue growth and if tariffs force it to scale back on that, this high-flying stock, which is trading around all-time highs, could be due for a correction.
Tariff policies in the U.S. have been volatile, but scrapping the de minimis rule may be the most concerning one for e-commerce companies like Shopify. While the stock has been doing exceptionally well this year, investors may want to hold off on investing in the company today, as it could be facing some significant headwinds in the not-too-distant future.
