Stock Markets Sink on Shopify “Slowdown”; Comstock Looks to Charge Up in Lithium

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Wednesday morning got off on the wrong foot for the stock market, as major market benchmarks pulled back after the release of some encouraging economic data. Retail sales were strong, and while that’s good news for the economy, it raised fears that the federal government might be less likely to pass economic stimulus legislation.

Shortly after 11 a.m. EST today, the Dow Jones Industrial Average (DJINDICES:^DJI) was down 41 points to 31,482. The S&P 500 (SNPINDEX:^GSPC) had fallen 19 points to 3,914, and the Nasdaq Composite (NASDAQINDEX:^IXIC) moved lower by 167 points to 13,880.

The tech arena took the brunt of the damage on Wednesday, and software-as-a-service stocks in particular felt the pressure despite an impressive showing from Shopify (NYSE:SHOP), a provider of an e-commerce enabling platform. Elsewhere, though, Comstock Mining (NYSEMKT:LODE) soared after making a move into a lucrative hot industry.

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Shopify keeps growing, but investors fear a sluggish 2021

Shares of Shopify were down 8% on Wednesday morning. The company released fourth-quarter financial results that showed sustained growth, but investors seemed to want even more.

The numbers were extremely strong. Total revenue jumped 94% in the fourth quarter compared to year-earlier levels. Gross merchandise volume (GMV) transacted on the site nearly doubled to $41.1 billion, and adjusted net income nearly quadrupled to $199 million. That capped a strong 2020 for Shopify, with sales climbing 86% and a 96% rise in GMV to help adjusted net income rise almost 15 times to $491 million.

But some investors were troubled by the source of Shopify’s sales gains. Merchant solutions revenue, which is largely dependent on volume, rose 117% year over year in the fourth quarter. The subscription solutions segment, though, which is responsible for the recurring revenue that investors prize so highly, saw slower gains of 53%.

Moreover, Shopify expects the slowdown to continue in 2021. It didn’t give specific guidance, saying only that Shopify “will continue to grow revenue rapidly in 2021, albeit at a lower rate than in 2020.” Concerns that the vaccine rollout could lead consumers to return to offline commerce in the second half of 2021 were particularly on the company’s mind. Investors should count on Shopify to sustain long-term growth, but that doesn’t mean it won’t have hiccups along the way.

Comstock Mining hits the mother lode

Elsewhere, shares of Comstock Mining (NYSEMKT:LODE) were up 175% after having quadrupled earlier in the session. The small Nevada-based gold and silver miner made a major strategic move to boost another side of its business, and that got the attention of investors in a big way.

Comstock will pay $4.5 million and issue 3 million shares of common stock to acquire up to a 64% stake in lithium-ion battery recycling company LiNiCo. That represents total value of about $10.75 million based on recent share prices.

LiNiCo recently bought a battery-metal recycling facility from Aqua Metals (NASDAQ:AQMS), and the company hopes to tap into the huge demand for lithium as a component in electric vehicle batteries. If the industry is to avoid supply shortages, a successful recycling strategy will be valuable. Aqua also invested $2 million in LiNiCo to take a 10% stake, and Aqua’s stock rose 13% Wednesday morning.

Comstock is just the latest among many companies dramatically shifting their priorities to take advantage of rising investing trends. With gold and silver no longer a huge growth opportunity, investing in LiNiCo is a chance for Comstock to change gears, and shareholders like what they’re seeing.

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