Which company is suggested for a potential short in the material?

• A. Shopify
• B. Amazon
• C. Microsoft
• D. Apple

Answer: (A)

The idea being tested is identifying a setup where a stock could face downside due to a combination of slowing growth and a high valuation. When a business relies on rapid expansion to justify its price, any sign that growth may be decelerating—especially in a competitive, cyclical area like online commerce—creates a risk to the stock.

Shopify fits this framing because its revenue comes from two main streams tied to merchants: ongoing subscription revenue and merchant solutions tied to Gross Merchandise Volume. If e-commerce slows or merchants tighten spending, GMV growth can slow, which in turn curbs the growth of merchant solutions revenue. Even if the company remains invest-heavy for a while, the stock’s value often assumes continued high growth, so any miss or a near-term deceleration can lead to outsized downside as investors re-rate the growth trajectory.

Additionally, Shopify faces ongoing competitive pressure from larger players with broader ecosystems, such as marketplaces and payment services, which can attract merchants away or reduce incremental growth in Shopify’s platform. In a softer macro environment, this magnifies the risk to margins and growth, making Shopify a plausible short idea in the material.

Other big tech names—while they can be exposed to similar macro headwinds—often have stronger cash flows, more diversified revenue streams, or different growth dynamics, which is why the material might cite Shopify as the preferred short in that scenario.