Shopify (TSX:SHOP) is an Ottawa-based technology company that provides a commerce platform and services in Canada, the United States, Europe, and around the world. The company’s leadership has made a strong push to expand its international footprint this decade. This tech stock proved to be one of the most explosive equities in North America in the latter half of the previous decade.
Today, I want to discuss how you would have fared if you invested $10,000 in Shopify stock back in 2016. Let’s jump in.
How Shopify became one of Canada’s biggest success stories in the 2010s
This tech stock made its debut on the S&P/TSX Composite Index in May 2015. The late 2010s proved a perfect storm for Shopify and its peers in the e-commerce space. Canadians have done more and more of their shopping through online channels as the 21st century has pressed on. Cyber Monday, which bookends the Black Friday holiday shopping weekend, railed off record sales year after year by the mid-2010s.
Shares of Shopify have jumped 4.2% month over month as of close on Friday, July 21. Meanwhile, this tech stock has surged 77% so far in 2023. Its shares have now climbed 84% in the year-over-year period. Investors can see more of its recent performance with the interactive price chart below.
Should investors be happy with the company’s 2023 earnings?
This company released its first-quarter (Q1) fiscal 2023 earnings on May 4. Shopify delivered total revenues of $1.5 billion — up 25% compared to the previous year. Gross merchandise volume (GMV) increased 15% compared to Q1 2022 to $49.6 billion. This powered Merchant Solutions revenue growth of 31% to $1.1 billion.
On the business front, Shopify launched a new artificial intelligence (AI) shopping assistant on its Shop application. The shopping assistant is powered by OpenAI’s ChatGPT application programming interface (API). This will allow for a more personalized experience using Shopify’s platform on the part of prospective shoppers.
For the rest of 2023, the company is projecting revenue growth that will align with what we saw in Q1. Moreover, Shopify is forecasting cash flow profitability for each quarter in 2023, and it expects capital expenditures to reach $100 million.
Here’s how your 2016 Shopify investment would look today
On July 21, 2016, shares of Shopify closed at $4.28. At the time, we could have snatched up 2,336 shares of this tech stock for a purchase price of $9,998.08.
Fast forward to the present day. Shopify stock closed at $86.71 per share on Friday, July 21. That means our 2,336 shares would be worth $202,554.56. That’s over $190,000 in capital gains over a seven-year period. Canadians who snatched up shares of Shopify in a Tax-Free Savings Account (TFSA) back in 2016 would have even more celebrating to do, as those gains would be entirely tax free.
Why Shopify is still a great pick-up right now!
Grand View Research recently valued the global e-commerce software market at US$6.2 billion in 2019. The same report projected that this market would deliver a compound annual growth rate (CAGR) of 16% from 2020 through to 2027. Indeed, the COVID-19 pandemic only accelerated this growth trajectory and pushed more consumers to the online shopping space.
Shopify suffered a major slump in the final month of 2021, which bled into the first half of 2022. For a moment, short-sellers were celebrating, and the sharp correction had some worrying that Shopify was at risk of becoming another Canadian tech darling that flew too close to the Sun. Fortunately, this tech stock has gained a second wind over the past half-year. Shopify has maintained solid earnings growth and pushed ahead with layoffs in Q1. The market responded very well to the news.
This tech stock still has room to run in 2023. I’m looking to snag shares of Shopify before July comes to an end.
