Shopify Stock Crashes After Earnings: Should You Buy the Dip?

Added: 2026-05-09

[00:00:00]Shopify stock got hammered on Tuesday, falling an incredible 16% and it's now down around 33% for the year. This is after the company posted some solid earnings numbers. So, what gives? Why is the stock down and is now the time to buy? Let's get into it. Shopify reported its Q1 results for fiscal 2026 and the top line looked solid. Revenue came in at $3.17 billion and that's up 34% year-over-year and it beat expectations of about 3.09 billion.

[00:00:28]And GMV, or gross merchandise volume, hit $100.7 billion. That's a huge milestone and record for the business.

[00:00:37]It's up from $74.8 billion a year ago.

[00:00:39]So, why was the market bearish on the results? Because the story did not end with revenue. Investors immediately zoomed in on profitability. Shopify reported net income of $360 million and analysts were looking for around 419 million. And when you factor in losses on equity investments, the headline earnings look even worse. On that basis, Shopify posted a loss of 45 cents per share for the quarter, while the street was expecting a profit of about 24 cents per share.

[00:01:08]But the bigger issue was arguably the guidance. For Q2, Shopify said it expects revenue growth in the high 20s percentage range. That's still strong.

[00:01:18]The problem is that it was pretty close to what investors already expected, so it did not feel like a big surprise on the upside. And it's also lighter than what it achieved this past quarter. The company also guided to a free cash flow margin in the mid-teens. That's basically in line with the 15% they delivered in Q1. But again, some investors and analysts were hoping for a little bit more. And this is where the valuation comes in. Shopify is priced at a premium, over 100 times trailing earnings and roughly 70 times forward earnings. When a stock is valued like that, it is basically priced for perfection. So, anything short of a strong earnings beat all around on top and bottom lines and a rosy guidance, and the stock could still fall even despite posting otherwise good numbers.

[00:02:01]There's also the big picture risk in the background. If consumer spending slows as it might if there's a recession or an economic slowdown, e-commerce growth can cool off quickly. That might be in the back of investors' minds as well. And that's even more of a risk when a company's valued as richly as Shopify.

[00:02:17]Again, things need to be rosy and perfect for the stock to really take off. So, here's the bottom line. Shopify put up a strong quarter on revenue and GMV, but expectations were extremely high, and the valuation is still rich.

[00:02:31]In that setup, anything less than an obvious beat can trigger a big sell-off, which is what's happened here.

[00:02:37]While this is a solid growth stock, the problem is that it's just too expensive to buy. Even with this recent sell-off, the stock isn't near its 52-week low, and its valuation hasn't come down to the point where it's really a bargain buy. I'd wait to see if this results in more of a drastic decline in its share price in the weeks ahead. But as of now, even with the sizable drop, I wouldn't be in a rush to buy it at this kind of valuation. But that's what I think. What do you think about Shopify? Are you buying it, or do you also think it's going lower? Let me know in the comments. Thanks for watching, and please leave a like and subscribe for more of these types of videos.

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