PreMarket Prep Stock Of The Day: Shopify

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

It's been a quiet few weeks regarding TikTok, but it's back in the news on Tuesday and is providing the catalyst for the rally in Shopify SHOP, making it the PreMarket Prep Stock Of the Day.

The Company: Shopify offers an e-commerce platform primarily to small and midsize businesses. The firm has two segments: subscription solutions (43% of fiscal 2018 revenue) and merchant solutions (57% of fiscal 2018 revenue).

The subscription solutions segment allows Shopify merchants to conduct e-commerce on a variety of platforms, including the company's website, physical stores, pop-up stores, kiosks, social networks (Facebook), and Amazon. Merchant solutions are add-on products for the platform that facilitate e-commerce and include Shopify Payments, Shopify Shipping, and Shopify Capital.

Recent Price Action: For the most part, Shopify has mirrored the market in 2020. After ending 2019 at $397.58, it rallied to a new all-time high in February ($593.89) before crumbling in March to $305.30. That low came in above its November 2019 low ($282.08) and below its December 2019 low ($311.53).

From that low, it more than participated in the broad market rebound, rallying to $1,146.91 in September for a 276% gain. It was not spared in the tech wreck, falling to $866.85 on Sept. 18, which provided the base for its recent rally towards its all-time high.

Catalyst For The Rally: Before today's open, it was reported the company partnered with TikTok to help merchants advertise on the social media platform. From past news updates regarding TikTok and another company, a rally in the associated company is soon to follow.

For example, Oracle ORCL and Walmart WMT both had significant rallies during their courtship of TikTok. It should be noted that both companies have faded from those highs.

Price Action: Prior to today's announcement during the premarket session, Shopify was trading slightly in the green from Monday’s close ($1,038.05) at the $1,042 area. Within minutes it raced to $1,074 and fell back to open for the regular session at $1,066.93. After a brief decline to $1,057.42, it spiked beyond the premarket high to $1,087.21 and has backed off that level.

That high came just under its Oct. 19 high ($1090.20). In order to post a new all-time closing high, it will need to end the session above its Oct. 14 close ($1,082.12).