Growth stocks could be an excellent type of asset to hold in your portfolio if financial independence is something that you aspire. This is because growth stocks have the potential to greatly outpace the broader market. However, with that reward comes greater risk. Because growth stocks are generally still trying to establish themselves within their industry, a lot can go wrong. Those risks can be reflected in their stock price, and investors should note that it’s very common to see larger drawbacks with these sorts of stocks.
However, despite that, I think all investors could benefit from holding at least a couple of growth stocks in their portfolio.
In this article, I’ll discuss the ultimate growth stock that I think investors should consider buying with $1,000 right now.
Which growth stock should you buy with $1,000 right now?
In my opinion, Shopify (TSX:SHOP) is the ultimate growth stock to buy with $1,000. For those that are unfamiliar, this company provides merchants of all sizes with a platform and many of the tools necessary to operate online stores.
For the first five years after its initial public offering, Shopify rose to fame as one of the best-performing stocks in Canada. In fact, in the 2020 edition of the TSX30, Shopify ranked as the best-performing stock over the past three years. Its performance during that period was so impressive that the performance of the next three stocks combined nearly totaled Shopify’s performance.
However, as mentioned previously, it isn’t all sunshine and rainbows when it comes to growth stocks. Shopify had a very hard time keeping its good times going in 2022. This could be attributed to two big factors. First, was the rapidly rising interest rate. Shopify had already established itself as a profitable company at that point. However, institutional investors tend to become very hesitant to buy shares in growth stocks during periods of high interest rates. That applies selling pressure on those kinds of stocks, and Shopify ended up as a casualty.
In addition, those higher interest rates made it a very difficult time for companies to operate in general. That led to Shopify having to lay off more than 10% of its workforce in an effort to maintain its profitability. Finally, consumer spending slowed down greatly at the start of 2022. This suggested to investors that Shopify, which greatly depends on consumer spend, might struggle for the foreseeable future. Thankfully, the company somehow managed to continue increasing its revenue during that period, even if only by a little bit.
Why is Shopify a stock that investors should buy today?
With all of that said, Shopify remains at the top of my list when it comes to stocks that investors should consider buying today. It remains one of the largest players in the global e-commerce industry. I believe Shopify could continue to hold that spot and perhaps even increase its lead on its competitors with the way it has set its business up.
The e-commerce industry has previously been projected to grow at a compound annual growth rate of 14.7% from 2020 to 2027. If that’s the case, then investors could see a massive uptick in Shopify stock if the company continues its strong financial performance over the coming years.