It was easy to forget about Shopify (TSX:SHOP) stock after it crumbled at the hands of the 2022 bear market in tech. It’s hard to believe that shares shed more than 82% of their value from peak to trough. Though valuations (and expectations of investors) got a tad out of hand during the magnificent 2020 share surge, I still view Shopify as one of a handful of hyper-growth tech companies that will be able to move on from the troubling era of high rates.
The rise of e-commerce still has legs. Though a recession could bring forth a year (or more) of sluggish growth, it’s still worth noting that Shopify has still yet to capture a lion’s share of the e-commerce market.
The total addressable market remains unfathomably large, and as a platform that’s put the power in the hands of everyday merchants, I think longer-term investors should be keeping tabs on Shopify stock, as it continues to move through a tornado of headwinds.
Shopify stock: The Canadian tech firm you simply cannot forget about
With the rise of AI (artificial intelligence), e-commerce may very well get a second wind, even as the recession touches down. Undoubtedly, generative AI has got many people very excited. There’s no question that the technology shows tremendous promise for all firms, Shopify included.
While you’re more likely to hear about American technology heavyweights as the “best plays” to bet on amid the rise of AI, I’d argue that Shopify is also one of the candidates that could really bolster its share in the e-commerce space, as it explores the possibilities.
In prior pieces, I’ve praised Shopify for its work on smaller AI offerings (like the product description tool). I think the AI-powered feature could be “the tip of the AI iceberg.” With all the tech talent and a history of making intriguing acquisitions, I’d look for Shopify to make smaller-scale acquisitions in the AI arena to enhance its already incredible platform.
Personally, I don’t think enough so-called “AI hype” has spread over to Shopify stock. Though the recent post-earnings surge has brought the heat back to the stock, there’s still a lot of room to run if Shopify is to regain its former glory or make a move to those now-distant all-time highs.
As Shopify shifts (or, should I say, reverses) its strategy from fulfillment (the company is divesting its logistics arm) to software (which could encompass AI innovations), Shopify has a very promising pathway to profitable growth.
Shopify stock pulls back 9% after post-earnings pop
In a prior piece, I’d warned that Shopify stock could be at risk of correcting after its post-earnings pop. The call turned out to be well timed, with SHOP stock now off just shy of 9% from its May 2023 peak.
Though shares could continue sagging lower over the nearer term, I’d not be afraid to begin averaging into a position at around $78 and change. Should shares tumble below $70, I’d look to keep adding to a position to lower the cost basis.
With concerns rising over the U.S. debt ceiling and the stickiness of inflation, tech could find itself giving up a bit of the gain it enjoyed through the year. I believe that such a correction is only healthy. Investors with cash on the sidelines may wish to take advantage of such dips in the road.
Shopify may be Canada’s most innovative firm. And though shares are prone to big booms and busts, I view the firm as worthy of stashing on your Tax-Free Savings Account radar. If you catch it on a bust, I think the longer-term risk/reward scenario could be tilted in the favour of investors.
Bottom line
Shopify’s track record hasn’t been flawless over the past few years. It may have overhired and been rushed into the logistics business with its prior acquisition of Deliverr. However, the firm has taken steps to correct (and learn from) its mistakes. Shopify is taking a few steps backward, and investors are liking the direction the firm is headed.
