Shopify (TSX:SHOP) is one of the most well-known stocks in Canada. For better or for worse, investors have been watching this stock’s performance very closely since its initial public offering. For the first five or so years, Shopify stock was on an absolute tear. It gained more than 1,000% between May 2015 and November 2021. Over that period, Shopify even managed to become Canada’s largest company by market cap.
However, since then, Shopify stock has fallen heavily. Today, the stock sits more than 70% lower than its all-time highs. This recent performance has caused many investors to wonder whether Shopify’s best days are behind it. So, is Shopify an incredible bargain today? Or is it a deceptive trap, waiting for greedy investors to take the bait? I’ll discuss that in this article.
Should investors buy Shopify today?
Before giving my opinion on whether Shopify is an incredible bargain or a deceptive trap, it’s important to understand where Shopify is as a business today. For those that are unaware, Shopify is one of the largest players in the global e-commerce industry. It provides a platform and many of the tools necessary for merchants to operate online stores. Today, Shopify’s platform is used by millions of merchants across 175 countries. That includes everyone from first-time entrepreneurs to multi-billion-dollar enterprises.
With that said, why has Shopify stock fallen so heavily over the past year or so? There are a couple of different reasons for this. In my opinion, it all started with the rising interest rate. As interest rates increase, it creates a very difficult environment for companies to grow in. As a result, investors become very hesitant to buy or even hold shares of growth stocks. That can lead to incredible selling pressure, as we’ve seen with Shopify stock.
In addition, Shopify resorted to massive layoffs as a way to help maintain its profitability during those difficult times. All considered, Shopify laid off more than 10% of its staff in 2022. Of course, that had negative consequences on Shopify stock.
Despite all of that, I think Shopify is still an excellent stock to buy today. I think any investor looking for growth should consider holding this stock in their portfolio. This is because Shopify’s business remains robust. We can dive a bit deeper into that.
A look into Shopify’s business
Shopify reported US$1.7 billion in revenue during the fourth quarter of 2022. That represents a year-over-year increase of 26%. For the entire year, Shopify’s revenue totaled US$5.6 billion. Again, that represents a very respectable year-over-year increase of 21%.
Shopify maintains a 10% market share of the massive American e-commerce industry. With the way its enterprise partnership network is set up, the company expects to increase that penetration over the coming years.
In my opinion, Shopify’s business is as strong as ever. Yes, its growth isn’t as strong as it was through the COVID-19 pandemic. However, those numbers were never going to be sustainable. If we look at the company for what it is today, investors can see that Shopify continues to grow each and every year. I think this is a great stock to buy today.