Retail Retreat: Shopify’s Checkout Woes Lead ‘Shop’ Pillar Drop in CE100 Index
Go figure. During the most intense shopping season of the year, the “Shop” pillar of the Connected Economy 100 went down 3.7% last week. It led the index down by 2.8%, as all the pillars dropped at about the same rate as the general markets.
Within that Shop pillar, Shopify’s 5% stock price decrease stood out. A sweep of the week’s news finds that it might have taken a hit from some negative publicity surrounding its checkout policies. Shopify has barred merchants from automatically adding charges like insurance premiums to shoppers’ orders. According to a recent article in The Information an increasing number of merchants now offer delivery insurance, covering theft or damages to packages and often add the charges to orders.
According to the article, “Such a trend threatens to upset Shopify’s shoppers, making them less likely to trust its Shop Pay checkout and to hurt its ability to sell its branded checkout to bigger merchants who don’t use its other services. That could hurt Shopify’s growth, which has surged this year — the company reported that revenue grew 23% in the first nine months of the year to $6 billion. That fueled a 41% increase in its stock price, lifting Shopify’s market capitalization to $142 billion.
In the “Bank” pillar, a 3.4% drop was accelerated by a 7.5 drop at Ally Bank. According to Marketbeat, analysts have weighed in with mixed reviews on Ally Financial, with several adjusting their price targets amid shifting market conditions.
Bank of America revised its price objective downward, from $46 to $37, while maintaining a “buy” rating in a Sept. 11 report. Royal Bank of Canada reaffirmed its “outperform” rating and set a $40 target price in an Oct. 21 note. TD Cowen followed suit on Sept. 23, lowering its price target from $45 to $37 and shifting to a “hold” stance. BTIG Research downgraded the stock from “buy” to “neutral” on Sept. 16. Wells Fargo took a more bearish view, cutting its target price from $37 to $32 and assigning an “underweight” rating on Sept. 26. Of the analysts covering Ally Financial, one rates the stock a “sell,” nine suggest “hold,” and eight recommend “buy,” according to MarketBeat.com. The consensus rating stands at “hold,” with an average price target of $42.14.
The “Live” pillar was also down 3.4%, led by a big 15.1% plunge at iRobot. The company, manufacturer of the Roomba vacuum and other in-home robotics, is in turnaround mode featuring a series of executive changes, and said so during its recent Q3 earnings call.
“We continue to make progress on our turnaround strategy,” said Gary Cohen, iRobot’s CEO. “In the third quarter, we expanded our non-GAAP gross margin by 590 basis points year over year and improved our use of operating cash. However, our overall results did not meet the expectations we set in August, as persistent market segment and competitive headwinds impacted our sell-through performance.
“Although we now expect it will take more time to stabilize our revenue trend, we are on track to exceed our operating expense targets for the year, while at the same time continuing to invest in areas that are expected to drive growth.”
The “Move” pillar dropped 3.4% as well. It was led downward by a 13% drop at freight transport provider XPO. Some analysts see a potential hit coming from the Trump administration’s threatened tariffs. But most analysts are bullish on the stock.
Marketbeat said, “Freight transporters like XPO Inc. NYSE: XPO and Old Dominion Freight Line Inc. NASDAQ: ODFL provide less-than-truckload (LTL) service domestically and internationally, making them a critical part of the process of connecting manufacturers with end customers. Of these firms, XPO stands out for its strong performance in the last year (shares of XPO are up 57% for the year as of Dec. 20, while ODFL has declined by more than 9% over the same period).”
Finally, the “Be Well” pillar took a 3.3% hit led by continued troubles at Aetna CVS, down 10%. Last week, it announced that it had expanded its health app’s functionality to include Spanish language support, aiming to enhance accessibility for its diverse member base. Spanish-speaking users can access features such as personalized health information, medication reminders, and telemedicine services in their preferred language.
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