Shopify (TSX:SHOP) Stock Is on an Absolute Tear

Shopify has been one of TSX’s top growth stock for a while now. Currently, it’s also a potent element in the TSX’s recovery.

| More on:
Hand holding smart phone with online shop concept on screen

Image source: Getty Images

The TSX has started to rally. Even though it’s still over 10% down from its year-to-date value, it is recovering. If we compare its progress to the S&P 500, the S&P/TSX Composite Index is lagging just 1.5% behind. The three main engines that are driving Canada’s stock market out of the slump are material, IT, and consumer discretionary sectors.

The leading role of the material sector is understandable, as a substantial part of it is made up of gold companies, and they were the fastest to recover. But IT, which represents only 7% of the overall weight of the TSX index, has also performed exceptionally well. Within the sector, the starring role goes to Shopify (TSX:SHOP)(NYSE:SHOP).

Shopify and tech sector

The Capped Information Technology Index has rallied back about 41% since its lowest point during the crash. It’s already 13% up from its start-of-the-year value. And while almost all the 16 constituents of the index showed great resilience, then recovery, the bulk of recovery was carried by Shopify.

The company has the largest weight by market cap in the index. Its capitalization is more than the rest of the stocks (in the tech index) put together. By sheer virtue of its weight, Shopify has the power to sink the sector or help it soar. Thankfully, in this situation, Shopify’s explosive recovery helped the IT sector and, by extension, the TSX in getting back on their feet.

The effect would have been more pronounced if it weren’t for the still down energy and financial sector.

The stock

Shopify’s stock grew over 93% in the past one-and-a-half years. It’s already trading at 67% higher than its start-of-the-year value. This sharp rise in the market value is fueling the IT sector’s recovery and growth. Currently, the stock is trading at $888 per share, but if it continues like this, the stock may top $1,000 per share price before long.

Currently, Shopify is used by over a million businesses from 175 countries in the world. That’s six times growth in its consumer base from May 2015, when about 165,000 businesses were using this platform. The company already has a powerful business model and an amazing platform, but it hasn’t run out of growth yet. Despite being a highly oversold stock, Shopify, as a company, has the potential to grow even further in the coming years.

The e-commerce landscape is expected to grow for several more years. In 2020, global e-commerce sales are expected to top US$4.2 trillion, and it can grow over US$6.5 trillion by 2023. As a key player in that market, Shopify might be one of the front liners to benefit from that growth. The company is also leveraging its decade worth of accumulated data to improve its platform even more.

Foolish takeaway

It would be too presumptuous to say that Shopify is single-handedly tipping the scales in favour of TSX. But that fact is, that after Royal Bank, Shopify is the most valuable stock currently trading in the market. Even at its overpriced stage, the company is attracting investors, and many people believe that it’s still a millionaire-maker stock.

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.

Fool contributor Adam Othman owns shares of Shopify. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Shopify and Shopify.

More on Tech Stocks

tech and analysis
Tech Stocks

2 Top Tech Stocks Investors Should Consider Buying Right Now

Tech stocks such as Sierra Wireless and Open Text are well positioned to deliver outsized gains to investors in 2022…

Read more »

cup of cappuccino with a sad face
Tech Stocks

Shopify (TSX:SHOP) Stock Has Been a Bloodbath

The share price of the TSX’s tech phenomenon could still plunge if the bloodbath continues due to the slowdown of…

Read more »

sad concerned deep in thought
Tech Stocks

Tech Stocks Crumble: Is it Time to Buy?

Shopify is coming down from its pandemic highs as its business falters, but BlackBerry's business is just gaining steam.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Tech Stocks

This 1 High-Growth Stock Just Got Irresistible

Despite a challenging macro environment, Lightspeed continues to post strong growth, which could help this high-growth stock stage a sharp…

Read more »

exchange-traded funds
Tech Stocks

Buy the Dip: 3 ETFs That Have Taken a Beating in 2022

Three prominent TSX ETFs trades at bargain prices in 2022 because of their significant exposure to the slumping technology sector.

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

Lightspeed Stock Gains 10% Post Q4 Results

Lightspeed stock gained on the back of stellar results in Q4 of fiscal 2022. Should LSPD stock be part of…

Read more »

Man data analyze
Tech Stocks

Tech Selloff: 3 Growth Stocks Available at Pre-COVID-19 Prices

Tech stocks such as Shopify and Zoom are trading at a much lower multiple due to the ongoing selloff in…

Read more »

TSX Today
Tech Stocks

TSX Today: What to Watch for in Stocks on Friday, May 20

The ongoing strength in the commodity market could help TSX Composite to continue outperforming its U.S. peers in the near…

Read more »