Why Investors Shouldn’t Give Up on Shopify Just Yet

Here’s why long-term investors may not want to throw in the towel just yet on e-commerce juggernaut Shopify (TSX:SHOP).

| More on:
A worker uses a laptop inside a restaurant.

Source: Getty Images

E-commerce giant Shopify (TSX:SHOP) is a company with a business model aimed at re-shaping the e-commerce space. This company services many top retail businesses, providing a platform that allows for e-commerce growth and an improved online presence. However, as the pandemic has faded, so too has the company’s growth prospects. Accordingly, this is a company that’s down a whopping 65% on a year-to-date basis alone.

Now down nearly 80% from its all-time high, many investors are drifting away from the stock. If you are investor in SHOP stock thinking of doing the same, now may not be the best time for such a move. This may actually be an excellent buying opportunity, and here’s why.

Shopify is a long-term holding

When the market turned bearish this year, many investors pointed to the macroeconomic turmoil that’s taken place as a reason for this dramatic downturn. Naturally, the macro environment has an impact on Shopify’s international business. However, surprisingly, Shopify’s international segment actually turned out to be a big positive for the company this past quarter. This segment brought in revenue of more than $1.4 billion for the third quarter. This translates into a year-over-year increase of 22%.

Shopify’s goal is to change the face of commerce. It has helped several retail businesses leverage their growth. Now, with its POS Go system, Shopify is helping retail business owners check out from anywhere inside their stores. This fully integrated mobile point-of-sales system will offer customers seamless store checkout. 

The e-commerce sector will not lose its relevance or importance in the long term, despite shoppers transitioning back to the “old-fashioned” ways of the past. Offline retail has gained back market share, but Shopify continues to be a leader in the e-commerce space. Accordingly, this company is one with among the most robust fundamentals of its e-commerce growth stock brethren. 

The company’s third-quarter performance is quite impressive and promising, and despite slowing growth, I think Shopify’s fundamentals look strong. It’s important to remember that Shopify is coming off of a pandemic-driven boom, so the base effects of higher sales last year have impacted the company greatly in 2022.

Bottom line

Shopify has always found ways to leverage the company’s high-growth model. I think over time, this is a company that’s well positioned to continue innovating toward a brighter future.

While the outlook right now may remain dim, there’s plenty to like about long-term upside driven by secular growth in the e-commerce space. In this realm, Shopify is likely to be a long-term winner. Accordingly, at this improved valuation, it’s a stock I think is worth buying, not selling, here.

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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

More on Tech Stocks

Various Canadian dollars in gray pants pocket
Tech Stocks

3 No-Brainer Stocks to Buy Right Now for Less Than $50

These no-brainer TSX stocks are poised to deliver solid capital gains in the medium to long term.

Read more »

money cash dividends
Tech Stocks

The Best TSX Stocks to Invest $5,000 in Right Now

These Canadian stocks have the potential to beat the broader market averages in the long term and generate solid capital…

Read more »

grow dividends
Tech Stocks

3 Monster Stocks to Buy Without Hesitation

Are you looking for great stocks to buy today? Here are three monster stocks you should buy without hesitation!

Read more »

telehealth stocks
Tech Stocks

WELL Health Stock Zoomed 15% After Earnings: Is it a Buy?

WELL Health stock is reporting record demand as revenue soars and guidance is increased once again.

Read more »

online shopping
Tech Stocks

Is it Time to Buy E-Commerce Stocks?

Are you curious about e-commerce stocks? Find out if I think it’s time to buy them!

Read more »

Growing plant shoots on coins
Tech Stocks

Is Now the Right Time to Buy Growth Stocks?

There are so many growth stocks that investors wish they'd bought back when they were down. Now, they're definitely down,…

Read more »

money cash dividends
Tech Stocks

2 Growth Stocks You Can Buy Right Now with Less Than $100

Given their solid performances, cheaper valuations, and healthy growth prospects, these 2 under-$100 growth stocks look attractive at these levels.

Read more »

potted green plant grows up in arrow shape
Tech Stocks

2 TSX Stocks Provide That Provide Tonnes of Consistent Growth

Here's why Constellation Software (TSX:CSU) and Restaurant Brands (TSX:QSR) are two top TSX stocks to buy for growth right now.

Read more »