Shares of Shopify (TSX:SHOP) hit 52-week highs on Tuesday, as the e-commerce company continues to grow higher and higher, defying the market and its overall performance.
But while shares of Shopify stock rising can be exciting, what should investors do in reaction: buy, hold, or sell? Let’s look at whether Shopify stock is going to keep on booming or whether it’s about to bust.
What happened?
Honestly? Nothing. There wasn’t any identifiable catalyst that led to Shopify stock hitting 52-week highs, beyond continued performance after the company’s announcements during its most recent earnings report.
Shopify stock announced during its earnings release that the company was going to focus back on its e-commerce sector. That meant selling its logistics business to Flexport for a 13% stake in the company. Furthermore, the company made massive layoffs at 20% of its workforce to bring in cash savings as well.
The news sent shares up, but these shares have continued climbing without too many drops since that time. Shopify stock is now up 97% in the last year and 63% year to date. Yet after hitting $88.64 at 52-week highs, shares then dropped, even by mid-morning by 3% from those highs.
So, what should investors do now?
Does Shopify stock align with your goals?
That’s the big question here. If you’re looking at Shopify stock, it shouldn’t be for some short-term gains that were witnessed in the past. Instead, we have to consider the long-term volatility of this stock, if it indeed exists.
In this case, analysts were recently impressed with Shopify stock for its performance coupled with these recent moves to save cash. While other e-commerce Canadian companies have dropped, Shopify stock remains stable at these levels, and has double down on its more successful business as a result.
Even so, after shares hit 52-week highs, it usually occurs that Shopify stock does see a drop in share price. This was seen pretty much immediately. However, that could mean it’s a good time to pick up the stock. That being said, I would only do so if you’re planning on holding it long term.
Why it’s a strong long-term hold
I’ve held Shopify stock for years now. No, I wasn’t one of the few buying up shares at $35 in 2015. That would be insanely lucky (and yes, I do mean lucky). Instead, I’ve held through the ups and downs of Shopify stock, because I truly believe it’s a solid long-term purchase for those seeking e-commerce growth.
Now that the company is coming back to reality and focusing on e-commerce growth as well as expanding in the point-of-sale sector, I’m back to believing stable growth is in the near future. That’s especially as it looks to consider what some of its larger peers have done, with merchants using Shopify products for purchasing options.
While I don’t believe we’re headed back to the insane prices of the pandemic, I do believe some more growth is coming for Shopify shareholders. Yet I would still wait to buy until excitement drops back. When Shopify stock hits the news and shares rise, take a breath. Let some people take their returns and then come back on board this once-great tech stock.
