Shares of Shopify (SHOP 9.83%) rallied on Wednesday, surging as much as 10.1%. As of 2:11 p.m. ET, the stock was still up 9.5%.
The rise was particularly notable, as each of the three major market indexes were in the red. The catalyst that sent the e-commerce platform provider higher was the revelation of an across-the-board price increase.
Shopify said late Tuesday that it would be raising prices for all merchants that use its platform, with monthly plan prices rising 33%, on average. Here’s a look at the increases:
- Basic plan: Increasing to $39 per month from $29 — up 34%
- Shopify plan: Increasing to $105 per month from $79 — up 33%
- Advanced plan: Increasing to $399 per month from $299 — up 33%
For merchants on annual plans, subscription prices doubled, with the Basic, Shopify, and Advanced plans rising to $14.44, $39.44, and $147.78 per month, respectively. The $2,000 monthly cost of the Shopify Plus plan remained unchanged.
Shopify justified the price hike. “The price we charge for access to the best tools in commerce has remained largely unchanged for the last 12 years,” said Kaz Nejatian, Shopify’s vice president of product and chief operating officer, on Shopify’s blog.
The past year has been a time of great transition for Shopify, a challenge the company has met head-on. It cut its workforce by 10% in mid-2022, in the wake of plunging e-commerce activity. The company has also continued to identify cost savings to shore up its bottom line.
In a message to employees posted on Shopify’s website last year, CEO Tobias Lütke issued a rare mea culpa, saying the company bet the pull-forward of e-commerce growth would continue, later admitting, “It’s now clear that bet didn’t pay off.”
Earlier this year, Shopify identified four key investment themes to build for the future. These included building buyer relationships, going global, scaling with merchants, and simplifying fulfillment. Investing in these priorities costs money, which helps explain the price hikes.
Raising prices was never going to be a popular move, but it’s one that was inevitable. Shopify will emerge an even stronger company by building through the challenges, which is why the stock is a buy.
Danny Vena has positions in Shopify. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends the following options: long January 2023 $1,140 calls on Shopify and short January 2023 $1,160 calls on Shopify. The Motley Fool has a disclosure policy.
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