Is Shopify (TSX:SHOP) a Foolish Buy?

Shopify Inc. (TSX:SHOP)(NYSE:SHOP) has seen a meteoric rise since its IPO. But is it still a smart buy today?

On the 21st of May in 2015, Shopify (TSX: SHOP)(NYSE:SHOP) made its debut on the New York Stock Exchange, and it was quite a blockbuster. Within the first day of trading, the shares gained just over 50% from where it started. The company’s shares went from an IPO pricing of US$17 to US$25.86, with a 51% increase, and that set the pace for the remarkable growth witnessed by Shopify.

In the 27 months following the debut of Shopify on the New York Stock Exchange, the Canadian giant has made a reputation for itself as one of the top performers in the stock market. It rose 500% in its value from the initial $17 IPO pricing during that period.

To help you get a better perspective of how well Shopify stock has performed, we should compare the stock to Facebook and Netflix. Both companies’ stocks returned around 100% in the same amount of time that Shopify increased by 500%.

Shopify stock skyrocketed in 2019 (and it isn’t slowing down)

SHOP has seen impressive growth in the past couple of years. The stock is up from $187.11 at the beginning of 2019 and is now up to $512.82. The vast growth is an increase of over 171% in 2019.

Shopify has benefited dramatically from the diversified and ever-increasing retailer base and its foray into the international market. One of the most recent legs of the stock rally came recently, as Shopify announced that it would make a few changes to the platform.

Shopify gearing up to rival a giant

The announcement was mostly about Shopify revamping Shopify Plus. Shopify Plus is an e-commerce platform, which enables its enterprise-level clients to expand their businesses. There is also the matter of the Shopify Fulfillment Network within the United States, which effectively puts it in competition with the global giant Amazon. Shopify also unveiled its POS software, which will allow merchants to improve their brick-and-mortar businesses.

These are all moves that have resulted from Shopify’s massive growth over the years and its ambitious announcements to improve on the already successful platform.

Expected growth for Shopify

Based on the report from first-quarter earnings, Shopify CEO Toby Lütke said the company is meeting a need that is not only global but is likely to continue growing for the foreseeable future.

SHOP stock’s growth trajectory reflects its significant growth and the company’s hunger for more. The investors are buying into the narrative that the company will continue to grow the revenue it generates at the dizzying pace that we have seen since the launch of the IPO.

Josh Beck, KeyBlanc Capital Markets analyst, said that the recent announcements by Shopify, especially the Shopify Fulfillment Network, are all going to set a positive industry sentiment. All of these factors can help the company rival Amazon in the industry.

Final words

Shopify has seen a parabolic rise in the years following its IPO. Of course, you should be looking at something more tangible before they consider a continued investment in the stocks. The new announcements are hopeful, but until the Shopify Fulfillment Network starts to operate at full scale, investors should hold off on betting that Shopify can indeed rival Amazon.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Adam Othman owns shares of Shopify. David Gardner owns shares of Amazon, Facebook, and Netflix. Tom Gardner owns shares of Facebook, Netflix, and Shopify. The Motley Fool owns shares of Amazon, Facebook, Netflix, Shopify, and Shopify. Shopify is a recommendation of Stock Advisor Canada.

More on Tech Stocks

a person watches a downward arrow crash through the floor
Dividend Stocks

The TSX Dropped 736 Points Thursday: Here’s Why Long-Term Investors Can Stay Calm

Long-term investors can stay calm in the gyrating waters of the stock market by maintaining portfolio diversification and rebalancing periodically.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

OpenText’s Revenue Fell Again, But Here’s What Investors Could Be Missing

OpenText’s latest results reveal growth beneath falling revenue, with its AI opportunity depending on turning customer demand into stronger earnings.

Read more »

running robot changes direction
Tech Stocks

Lightspeed Stock Drops 14% After Earnings: Here’s Why I’d Buy the Dip

Dax Dasilva explains how better customer deals and AI that tackles merchants’ daily chores could strengthen Lightspeed’s recovery.

Read more »

gift is bigger than the other
Tech Stocks

Holiday Test Ahead: Shopify Forecasts Another 30%-Plus Quarter as Shoppers Gear Up

Shopify forecasts another quarter of 30%-plus revenue growth. Here’s what its holiday outlook means for investors, and which results to…

Read more »

businesswoman meets with client to get loan
Tech Stocks

Your TFSA Doesn’t Need Another Speculative Stock: Here’s the Growth Case for CGI

CGI offers a growth case built on paying clients, rising per-share earnings, and a shrinking share count.

Read more »

man studies at computer
Tech Stocks

Here’s What a $10,000 Investment in Anthropic Could Be Worth by 2030

Anthropic could be a huge moneymaker for investors if it can maintain its rapid growth rate.

Read more »

woman considering the future
Tech Stocks

Shopify Stock Fell After Earnings: Here’s How I’d Judge It for a 10-Year TFSA

Shopify's selloff offers a cheaper entry into a growing business, but a 10-year TFSA still needs price discipline.

Read more »

young adult uses credit card to shop online
Tech Stocks

Shopify Stock Tumbles Despite 32% Sales Growth: Buy Now, or Buyer Beware?

Shopify stock fell despite 32% sales growth. Explore what drove the selloff and whether stronger cash flow makes the shares…

Read more »