Shopify (TSX: SHOP)(NYSE:SHOP) stock took another uppercut to the chin on Wednesday, surrendering just north of 10% of its value after weaker-than-expected earnings. Indeed, it may be too early to tell if buying shares of SHOP on the dip was a wise move. With a handful of mega-cap tech stocks showing signs of fragility following their latest earnings releases, I think that there’s a very good chance that more pain could be in store for those dip buyers who are betting so aggressively on a bottom.
Indeed, when times get tough, dollar-cost averaging (DCA) may be the way to go! Remember, vicious selloffs tend to overswing to the downside, warranting some correction to the upside once the dust settles and emotions temper. Right now, Shopify stock is at risk of plunging back to those $1,000 lows.
The stock remains expensive at over 29 times sales. While the narrative hasn’t changed much in recent weeks, I still think the macro environment and rate policy will dictate the trajectory of the stock, rather than company-specific progress.
Investor beware: Shopify stock could have more room to the downside
For that reason, Shopify stock may be too risky a name to own with the entirety of your TFSA at this juncture. If, however, you are keen and believe rates won’t rise nearly as fast as the market predicts, nibble your way into a full position. Get some skin in the game here with a share at $1,100 and be ready to buy more should they sink to $900 or $700. By doing so, you’ll be able to lower the bar on your cost basis and not feel so pained by those huge down days!
If tumbling shares of Shopify aren’t your cup of tea (they’re not mine right now, given I believe they’re still overvalued), Nutrien (TSX: NTR)(NYSE: NTR) may be an easier stock to stomach amid the recent tech stock chaos. Shares of the value play have a good amount of momentum riding behind them, with valuation metrics that aren’t at all excessive! Further, the name is very profitable — something investors can appreciate as rates creep higher.
Nutrien: A dividend stud with momentum and value
Nutrien is an agricultural commodity kingpin that’s gotten its groove back. Shares of the name went from dud to stud, thanks to relief across the broader commodity space. Indeed, commodities are intriguing plays in this inflationary market. Up 42% over the past year, NTR stock has a lot of heat behind it, but its valuation remains modest, at best. The stock goes for 18.5 times trailing earnings alongside a bountiful 2.5% dividend yield.
Sure, it’s not the same bargain as it was a year ago, but it’s one of few quality firms that could sustain its rally while dodging past much of the tech-centric volatility we’ve witnessed this year. With a new CEO at the helm and improving fundamentals, NTR stock ought to be a top pick for those seeking momentum and value.
As Shopify stock reverses course, look for Nutrien to steadily trend higher in what could be the year of value’s return.
The bottom line
Shopify is a magnificent company. It could be the number-one TSX company again. But for now, I can’t get behind the stock at nearly 30 times sales. As the risk-off trade heats up, Nutrien stock could be the new class of momentum plays to outperform over a next three years that could see rates move well above 2-3%.
