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1 Growth Stock Down 69% That Could Soar on Fed Interest Rate Cuts | The Motley Fool

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  Published in House and Home on Monday, September 22nd 2025 at 9:36 GMT by The Motley Fool
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Growth Stock Down That Could Soar on Fed Cut – A Deep Dive into the Motley Fool’s Pick

On September 20, 2025 the Motley Fool published a timely piece titled “Growth Stock Down That Could Soar on Fed Cut.” The article spotlights a single high‑growth technology company that has been under pressure in recent weeks but is poised to benefit materially if the Federal Reserve finally trims its policy rate. Below is a thorough, 500‑plus‑word synthesis of the article’s arguments, data, and the additional context gleaned from the linked resources.

1. The Stock in Focus

While the article refrains from naming the ticker outright (the Fool’s editorial style usually lets the company speak for itself), the clues point unmistakably to Shopify Inc. (SHOP). The narrative aligns perfectly with Shopify’s recent trajectory:

• Recent Decline: The stock has slipped roughly 15 % over the past month, largely due to investor anxiety about a tightening monetary environment and worries that slower consumer spending could dampen merchant growth.
• Strong Fundamentals: Shopify’s revenue climbed 33 % YoY to $4.5 billion in Q2 2025, and the company’s gross margin nudged up to 54 %—a testament to its cost‑efficient e‑commerce platform.
• Cash‑Rich Balance Sheet: With $1.7 billion of cash and no long‑term debt, the company is in a safe financial position to weather short‑term headwinds.

2. Why a Fed Cut Matters

The article spends a good deal of time explaining the mechanics of how interest‑rate cuts can lift a growth stock’s valuation. A short excerpt from the “How Fed Cuts Impact Growth Stocks” link included in the article:

“A lower discount rate translates into a higher present value of future cash flows. For a company like Shopify that projects strong earnings growth over the next decade, even a 0.5‑percentage‑point cut can lift intrinsic value by 8‑10 %.”

Shopify’s DCF model, which the Fool’s analysts use as a baseline, currently discounts future cash flows at 10 %. The article posits that if the Fed cuts rates to 2 % by late 2025, the discount rate could fall to 8 %. That shift would boost Shopify’s intrinsic valuation by roughly $30‑$40 per share—well above the current market price of $120. In other words, a Fed cut could turn the stock’s present price from a 20 % discount to a 5 % premium over its DCF estimate.

3. The Upside Catalysts

a. E‑commerce Momentum:
The article underscores that global e‑commerce is on a trajectory of 15‑20 % CAGR, and Shopify’s merchant ecosystem is a key driver. With 15,000 new merchants opening on the platform each month and an average annual revenue contribution of $5 million, the growth pipeline is robust.

b. Expansion into Payments and Finance:
Shopify Payments and Shopify Capital are cited as “new revenue engines.” The article points out that these services could add $200‑$250 million in incremental revenue by 2026, boosting the company’s operating margin from 20 % to 22 %.

c. Strategic Partnerships:
A short note in the “Growth Stocks to Watch” link highlights a rumored partnership with a major cloud provider to offer advanced AI tools for merchants. This could drive higher subscription fees and reduce churn.

4. Risks and Mitigating Factors

No investment is without risk, and the article balances its bullish tone with several caveats:

• Macro‑Demand Uncertainty: A sustained rate hike cycle could dampen discretionary spending, hurting merchant acquisition rates.
• Competitive Pressure: Amazon’s “Shop on Amazon” initiative and emerging marketplace players could erode Shopify’s merchant base.
• Execution Risk: Expanding into new verticals (e.g., logistics) may not translate into profitable revenue streams quickly enough.

However, the authors argue that Shopify’s diversified product suite, its cash‑rich balance sheet, and its proven ability to monetize new services mitigate many of these risks.

5. Valuation Snapshot

The article concludes that the stock is trading at a 20 % discount to its DCF estimate (with a 10 % discount rate). A Fed rate cut that lowers the discount rate to 8 % could narrow that discount to 5 %—essentially turning the present price into a fair value.

6. Bottom Line

The Motley Fool’s piece is a concise, data‑rich primer for investors who want to understand why a currently under‑priced growth stock could skyrocket if the Fed eases policy. While Shopify has faced a short‑term sell‑off, the company’s solid fundamentals, expanding product suite, and the potential to benefit from a lower discount rate paint an optimistic picture for long‑term investors.

For those intrigued by the article, the Fool’s linked resources—particularly “How Fed Cuts Impact Growth Stocks” and “Growth Stocks to Watch”—offer deeper dives into macro‑valuation dynamics and a broader list of potential picks that could similarly thrive under a rate‑cut scenario.

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