The Motley Fool

TSX Investors: Why Shopify (TSX:SHOP) Is the Ultimate AI Stock

Image source: Getty Images

Shopify (TSX:SHOP)(NYSE:SHOP) has been one of the most electric stocks on the Toronto Stock Exchange since its initial public offering in 2015. It has been one of the highest performers in the North American technology sector. The company is utilizing artificial intelligence to drive the improvement of its platform. This is one of the reasons it is one of the best AI-linked stocks Canadians can target today.

Shopify using AI to empower its merchants

Back in March, I’d discussed some of the ways Shopify is using artificial intelligence (AI) to power its business. Shopify goes into detail on its own site, pointing out Alphabet’s use of “AdSense Auto ads, which use machine learning to make placement and monetization decisions on behalf of the user.”

The company is also focused on the personalization of the consumer experience, which can propel its merchant businesses. The Shopify App Store boasts tools that enable its merchants to send automated product recommendations as well as AI-powered emails.

In June, Shopify announced an AI-powered fulfillment network that aims to support merchants that ship between 10 and 10,000 packages per day. Shopify said that the fulfillment network uses machine learning to achieve timely deliveries and lower shipping costs. Fulfillment systems are traditionally reserved for the largest companies in the world, but Shopify says it wants this to be accessible to every merchant.

AI is fueling earnings growth

Shopify released its third-quarter 2019 results on October 29. The company stated that it boasts over now million merchants on its platform. Total revenue rose 45% year over year to $390.6 million, and gross merchandise volume climbed 48% to $14.8 billion. Shopify had to swallow an adjusted net loss of $33.6 million, or $0.29 per share in the quarter, which was down from an adjusted profit of $5.8 million, or $0.05 per share, in the prior year.

Shares of Shopify have retreated 10.7% month over month as of close on November 7. Widening net losses have seemingly spooked investors, as Shopify is now trading more than $150 off its 52-week high. Short-sellers have targeted Shopify since 2017 for its valuation and lack of transparency when it comes to its merchant information. The stock has climbed over 100% in 2019 so far.

Should you buy today?

Shopify stock has shed nearly $170 in value since it reached its all-time high in late August, and it is still trading at the higher end of its 52-week range. If you have not been following the stock, that should give you an indication of just how wild its performance has been in 2019. Still, the horror stories of the past in the Canadian technology sector have given investors some pause. Nortel, BlackBerry, and Valeant often come to mind.

The company boasted over $2.6 billion in cash as at September 30, 2019. It has posted strong revenue growth, and it is ramping up its international expansion as we move into the next decade. Shopify is still pricey, but it has a strong balance sheet and high-growth potential. I’m looking for opportunities to jump in in late 2019.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Fool contributor aocallaghan has no position in any of the stocks mentioned. David Gardner owns shares of Alphabet (A shares) and Alphabet (C shares). Tom Gardner owns shares of Alphabet (A shares), Alphabet (C shares), and Shopify. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), BlackBerry, Shopify, and Shopify. The Motley Fool recommends BlackBerry.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.