Is Now the Right Time to Buy Shopify Stock?

Are you interested in Shopify stock? Here, I’ll discuss whether now is the right time to buy shares!

| More on:
clock time

Image source: Getty Images

Shopify (TSX:SHOP) has been one of the most talked-about stocks since its initial public offering (IPO). Most of this talk has been good. Over the first six or so years of Shopify’s existence on the public markets, the stock gained more than 6,000%! In fact, its growth from 2017 to 2020 was so impressive that Shopify stock listed as the best performer on the TSX between that period. To further put this market dominance into perspective, Shopify stock’s growth over that time nearly equated to the gains generated by the three next best-performing stocks combined.

However, last year, a lot of the talk surrounding Shopify turned negative. Like many other growth stocks, Shopify was negatively affected by the economic conditions in 2022. A lot of this had to do with the rising interest rate. As that rate grew higher, investors become more hesitant to invest in growth stocks. As a result, growth stocks saw their values plumet. Shopify experienced a drop in value of as much as 83%!

Today, however, Shopify stock is in a much better position. The stock still sits more than 70% lower than its all-time highs. However, the stock has rallied more than 60% from its lowest point in 2022. With that said, is it time to buy Shopify stock?

Should investors be buying Shopify stock today?

In my opinion, it’s an excellent time to be buying shares in Shopify. With a recent rally of more than 60%, institutional investors have shown that they’re willing to support this stock moving forward. In addition, Shopify continues to be one of the biggest players in the global e-commerce industry.

In its most recent earnings presentation, Shopify reported US$5.6 billion in revenue for fiscal year 2022. That represents a year-over-year increase of 21%. In addition, the company claimed a 10% share of the massive U.S. e-commerce market, with further plans to increase penetration.

Shopify has been able to become such an important player in the e-commerce market thanks to the establishment of its enterprise partnership network. By giving its merchants access to the likes to YouTube, Spotify, Walmart, Meta Platforms, and more, its merchants always have the opportunity to land their stores in front of consumers.

As the e-commerce industry continues to grow, I expect Shopify to grow alongside it. It’s previously been forecasted that the industry could experience a compound annual growth rate of 14.7% from 2020 to 2027. If that’s the case, then the industry leaders could see much larger growth than that industry average. This bodes well for Shopify’s future.

Foolish takeaway

For better or for worse, Shopify has been one of the most talked-about stocks on the TSX since its IPO. This stock has seen its fair shares of high and lows. Following a very difficult 2022 for Shopify, the stock has started to rally, gaining more than 60% from its lowest price point last year. I believe it’s an excellent time to be buying shares, on the back of that excellent rally. Investors will still have an opportunity to buy shares at a discount, as Shopify stock currently trades about 70% lower than its all-time highs.

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.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Jed Lloren has positions in Shopify and Spotify Technology. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Meta Platforms, Spotify Technology, and Walmart. The Motley Fool has a disclosure policy.

More on Investing

Tech Stocks

1 Under-the-Radar Beneficiary From the Rise of ChatGPT

ChatGPT will benefit AI-enabled stocks like Docebo (TSX:DCBO).

Read more »

money while you sleep

Worried About Market Volatility? 3 Defensive Stocks for Better Sleep Tonight

Risk-averse investors can sleep better and seek safety in three defensive stocks to counter not only a recession but heightened…

Read more »

Businessman holding AI cloud
Tech Stocks

TFSA: 2 AI Growth Stocks for Your $6,500 Contribution

Here are two of the best AI stocks to buy in Canada in 2023.

Read more »

edit Safety First illustration

Add a Margin of Safety With 3 Consumer Staples Stocks

Are you looking for stocks that could give your portfolio a margin of safety? Buy these three consumer staples stocks!

Read more »

Man data analyze

TFSA Investors: The 4 Very Best TSX Stocks to Own This Decade

TFSA investors should look to snatch up TSX stocks like Enbridge Inc. (TSX:ENB) and goeasy Ltd. (TSX:GSY) in March.

Read more »

retirees and finances
Dividend Stocks

Retirees: 3 Ideal Stocks to Buy in a Bearish Market

Given their low-risk businesses and stable cash flows, these three Canadian stocks are ideal buys for risk-averse retirees.

Read more »

edit Colleagues chat over ketchup chips
Tech Stocks

The Best Stocks to Invest $50,000 in Right Now

You can create a portfolio of undervalued stocks with $50,000 right now. Here are three such stocks you can add…

Read more »

data analyze research
Dividend Stocks

3 Dividend Powerhouses to Buy for Reliable Passive Income

Are you seeking passive income? These three Canadian stocks are reliable investments for generate steady income.

Read more »