Shopify Stock: Is 2023 Finally the Year to Buy (Back) in?

2022 was a great year for sectors like energy, but it was a nightmare for the tech sector. However, 2023 might offer the opposite trend.

| More on:
A shopper makes purchases from an online store.

Image source: Getty Images

2022 was not a good year for tech stocks. The IT index fell roughly 35% in the year, and even though the sector rallied in the middle and near the end of the year, it wasn’t enough to counteract the downward momentum. This year has been different (so far). The index has risen up 12%, and even though the growth momentum of the first one-and-a-half months has waned, a proper decline hasn’t started yet.

If you let go of Shopify (TSX:SHOP) stock any time in the past (or haven’t bought it yet), it’s natural to wonder whether 2023 is a good year to add it to your portfolio.

Shopify and the e-commerce market

Shopify still holds a significant piece of the e-commerce website market, and even though its market share is more than double the size of the next largest player (Magneto), it’s significantly behind the top player — Woocommerce. But it’s not an apt comparison. Shopify has a subscription-based model, while WooCommerce, along with WordPress, is free and open source.

While that doesn’t mean that WooCommerce websites are completely free since businesses have to pay for features and add-ons, as they scale up their e-commerce businesses, it’s quite different from Shopify and may offer more flexibility. Shopify, however, is more beginner friendly and takes care of most of the things like security, hosting, analytics, etc., and it’s all lumped in easily monthly subscriptions.

Even though subscription revenue only makes up a segment of the company’s total revenues, the number of merchants and online shoppers are good indicators of the company’s organic growth. However, Shopify’s recent reports (post-2019) don’t offer much clarity regarding these numbers, especially the number of merchants, which is a sign of concern.

Shopify stock

If Shopify’s stock recovers to its post-pandemic peak, you can easily grow your capital by over 3.5-fold. But the real question is, will it recover to that level? If we assume that the recent correction has neutralized all the gains made by the stock in 2020 and 2021 and we are back to pre-pandemic levels, then Shopify can be a great buy, assuming it starts going up at its typical pace and keeps that pace for at least a few years.

Even if the probability of the stock moving up at its former pace is relatively low, there is still a strong chance that it will go up alongside a recovering tech sector. A tech sector recovery in 2023 may be a relatively strong probability. If Shopify generates and leverages some optimism in the market, the stock may offer returns disproportionate to a simple, sector-driven recovery and growth.

Foolish takeaway

While Shopify doesn’t reign the TSX as the largest security, it’s still among the largest blue-chip stocks in Canada. In the right market conditions, the stock can offer powerful long-term growth, and if the starting point of that bullish phase is in 2023, then it’s the perfect year to buy or buy back this company.

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 Adam Othman 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

online shopping
Tech Stocks

Is Shopify Stock a Buy in March?

Shopify stock has had a volatile run, but fundamentals are strong, and valuations are much lower after its 71% decline.

Read more »

data analyze research
Tech Stocks

2 Top Stocks to Buy in March 2023

Given their solid financials and high-growth prospects, these two stocks are excellent buys right now.

Read more »

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

Is Kinaxis Stock a Buy at 52-Week Highs?

Kinaxis stock is up 31% in the last six months, though 5% in the last year. So as the stock…

Read more »

healthcare pharma
Tech Stocks

Should You Buy WELL Health Stock After Q4 Earnings?

Given its solid financials, healthy growth prospects, and attractive valuation, I am bullish on WELL Health.

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

2 Tech Stocks That Could Set You Up for Life

Canadian investors can set themselves up for the future with top tech stocks like Descartes Systems Group Inc. (TSX:DSG).

Read more »

dividends grow over time
Tech Stocks

Got $1,000? Buy These Hot Growth Stocks Before They Take Off

Investors won’t want to miss these buying opportunities. Here are three discounted growth stocks to load up on today.

Read more »

Woman has an idea
Tech Stocks

2 No-Brainer Stocks to Buy With $500 Right Now

Given their solid financials, healthy growth prospects, and attractive valuation, I am bullish on these two TSX stocks.

Read more »

Business success with growing, rising charts and businessman in background
Tech Stocks

A Bull Market Is Coming: 1 Growth Stock Down 33% to Buy and Hold Forever

Here's why quality growth stocks such as Aritzia are compelling long-term bets for TSX investors.

Read more »