Is Now the Right Time to Buy Shopify Stock?

Amid another dip, Shopify stock might be worth buying right now for investors who missed the post-earnings surge.

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The 2022 bear market in tech stocks saw some of the biggest names in Canada’s tech space crumble. Shopify (TSX:SHOP) was the largest stock in market capitalization on the TSX before the meltdown. Shopify stock lost over 80% of its value from peak to trough amid the selloff.

While some of the correction might have been warranted due to share prices being inflated during the 2020 market surge, I still think Shopify stock can move on and fully recover to better levels.

Despite the setbacks for the tech industry, there is no denying that the e-commerce industry still has a long and wide runway. While a recession may hamper or slow growth, Shopify is well positioned to capture a major share of the e-commerce industry.

As a major platform offering better opportunities for merchants of all sizes, Shopify might become increasingly important in the industry in the coming years.

Plenty of room and potential to grow

With artificial intelligence (AI) integration becoming increasingly popular across all industries, it is no surprise that the e-commerce industry will also benefit from it. From product description tools to more complex AI offerings, Shopify can integrate innovative tech tools to enhance its platform.

The company has a record of making good acquisitions to fuel its growth. It would not be surprising to see more acquisitions in the AI space to enhance its platform further. Shopify’s recent earnings saw its share prices surge by 35% between May 4 and May 8, 2023.

Its earnings report saw revenues surge by 25% year over year for the first quarter of fiscal 2023. Additionally, its gross merchandise volume grew by 15% to hit $49.6 billion. Shopify also reported a 12% surge in its gross profit. The company also announced that it would lay off 20% of its workforce as a cost-cutting measure, which is a move seen in a positive light by its investors.

The pullback

The sudden surge after the earnings release was arguably overdone. It did not take long for Shopify share prices to experience a pullback. As of this writing, Shopify stock trades for $80.69 per share. It is down by 7.81% from its 52-week high. It is possible for its share prices to decline further in the coming weeks.

With inflation still impacting the economy and global recessionary fears, the tech giant might see further price deterioration. That said, such a correction is only healthy. Boasting immense growth potential, Shopify stock might be worth adding to a well-balanced portfolio if you are willing to take on the capital risk involved.

Foolish takeaway

Shopify stock is by no means a low-risk investment. The company’s initial growth led to many decisions being made by the company that did not bear fruit. As the company’s management learns from its mistakes, investors seem increasingly interested in investing in its shares.

While it remains a risky investment, the onset of a bull market could send its share prices soaring. If you have a long investment horizon, Shopify stock might be worth investing in today despite further potential short-term share price declines.

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.

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