Shopify’s Earnings Were Incredible: The Stock’s on Sale

Here’s why Shopify (TSX:SHOP)(NYSE:SHOP) remains a buy following stellar earnings of late.

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When it comes to the technology space, Shopify (TSX:SHOP)(NYSE:SHOP) remains one of my top picks on the TSX right now. Yes, this stock continues to be expensive. However, there are certainly valid reasons for that.

This long-term growth gem has provided investors with jaw-dropping capital appreciation in recent years. Since the company’s Initial Public Offering (IPO), Shopify has done nothing but outperform. Indeed, those who continue to hold this stock have locked in some nice capital gains. For those holding Shopify in a Tax-Free Savings Account (TFSA) — the preferable vehicle of choice for such an investment — such problems are moot.

However, Shopify is one of those stocks investors should consider owning in any portfolio. Here’s why.

Shopify smashes revenue and earnings expectations

As things (hopefully) move toward a new normal, expectations that e-commerce growth could slow has taken Shopify’s share price on a downward journey of late. Indeed, many of these fears are likely accurate.

However, Shopify’s recent earnings tells a different story. The company’s Q1 earnings did much to eliminate these concerns from investors’ minds. Continued acceleration in gross merchandise value across the Shopify ecosystem took even the most bullish analysts by surprise. And other high-profile figures are now stepping into Shopify in a big way at these levels.

Famed investor Cathie Woods recently took on a significant stake in Shopify. As per her recently filed 13-F, one of Ark Management’s biggest additions this past quarter was Shopify. Ms. Woods has put Shopify and Amazon in a similar league in recent comments. Accordingly, retail investors appear to be taking notice.

Shopify’s growth rate is perhaps the key reason for this. On a year-over-year basis, the company grew its revenue by its standard near-triple-digit rate. For growth investors, that’s the sort of growth that’s hard to come by with any stock in the market today. As we progress further into the recovery and Shopify expands, those sorts of growth numbers are going to be harder to come by.

However, all indications are that Shopify’s set to continue this pace of growth for some time.

Bottom line

As per projections of eMarketer, e-commerce sales via social media will grow by approximately 35% in 2021. Indeed, this growth will not be disrupted as more and more consumers are now making purchases via social media platforms, such as Facebook and Twitter.

It seems that Shopify is well positioned to make the most of the booming social media space. The fact that this company enables small-scale businesses to set up their very own online store conveniently sets them apart from other e-commerce businesses, such as Amazon.

Shopify’s growth thesis remains solid as of today. Now that the shares of this tech company are selling at a discount, I have no doubt that investors will begin to see the opportunity with this stock, as Cathie Woods has recently.

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.

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 Chris MacDonald has no position in any of the stocks mentioned. David Gardner owns shares of Amazon and Facebook. Tom Gardner owns shares of Facebook, Shopify, and Twitter. The Motley Fool owns shares of and recommends Amazon, Facebook, Shopify, Shopify, and Twitter and recommends the following options: long January 2023 $1140 calls on Shopify, short January 2023 $1160 calls on Shopify, long January 2022 $1920 calls on Amazon, and short January 2022 $1940 calls on Amazon.

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