Shopify (TSX:SHOP) stock hit the ground running this year, with a massive 71.3% surge year to date. The stock’s now up more than 123% from its lows last year. You had to jump in when it seemed all hope was lost to get the double, though. And it was not easy, as SHOP stock only seemed to gravitate lower week after week.
These days, shares of Shopify only seem to move higher. The relief rally is warranted. But the real question that value investors must ask themselves is: has it overextended?
Undoubtedly, any new momentum play can have its fair share of corrections. Shopify could hit bumps in the road, as recession chatter kicks it up a notch, and investors fear what could happen to e-commerce spending. In any case, I think younger investors have what it takes to ride out a storm. Can Shopify plunge 10%, 20%, or even 30% after its magnificent rally?
Sure, but if it does, you should be happy to buy even more. In fact, you should hope a stock moves lower after you’re bought into your first partial position. It’s only when you buy a full position that you dread every down day.
Shopify stock can still be cheap and get dinged after its strong run!
Given the stakes (and momentum) are higher, I’d encouraged investors to consider dollar-cost-averaging (DCA) into SHOP stock over time if they fear being late to the party. Personally, I think Shopify stock may still be undervalued.
Yes, it more than doubled in less than a year. But let’s not forget the massive crash it endured last year. Even with the double, shares are nowhere close to their all-time high, just past the $200 per-share mark. Is it realistic for Shopify stock to hit new highs? Probably not, unless the company can expand its total addressable market (TAM) in the way that Nvidia did.
There’s still massive room to run in the e-commerce scene. Further, Shopify is tapping into the point-of-sale (PoS) market. And let’s not forget about the metaverse! I think the future of retail lies in augmented reality (AR) or virtual reality (VR), where you can view a product in 3D before hitting the buy button.
Undoubtedly, things could get strange as VR takes off. And Shopify is one of the benefactors that I believe few are talking about. Sometimes, it’s the opportunities that are just outside of plain sight that are most worth pursuing.
Bottom line: SHOP stock + DCA = a smart move
As upbeat as I am on shares of Shopify, I acknowledge the risks. Any stock that’s doubled in less than a year can easily surrender most of the gains in a hurry! That’s why I can’t emphasize enough that Shopify is a name built for the DCA strategy.
Sure, you may end up kicking yourself for not buying into a full position if Shopify spikes past $100 from here, never looking back. However, if it declines below $60, you’ll probably be joyed to buy more. I think DCA takes a bit of fear and greed out of the equation. And that’s never a bad thing when it comes to a volatile tech titan like Shopify!
