Although Canada is known to be famous for its mining and energy stocks, adding stocks from other leading sectors can diversify your portfolio to mitigate risks. Indeed, if you are a patient investor looking to diversify your portfolio, Shopify (TSX:SHOP) can be a wise pick for investors seeking growth stocks in the technology sector.
Shopify’s stock price has been volatile and is still far from its all-time high seen in 2021. However, with the e-commerce platform provider surging in 2023, there’s hope that a continued momentum-driven rally could result in a double-up for owners of SHOP stock by year end.
Let’s dive into just how likely that scenario is and what factors investors should watch in this regard.
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Q2 earnings paint an intriguing picture
Shopify’s second-quarter (Q2) 2023 results have been released, and investors thus far have taken some time to warm up to the numbers. Shares of SHOP stock dropped on the report, but there are reasons to believe that this dip could be temporary.
In a nutshell, Shopify’s results showed strong revenue growth (28% year over year for the first half) alongside a projection of compound annual growth rate of 15% moving forward for the next four years. As Shopify continues to grow at breakneck speed, the idea is that it will continue to grab market share and improve its margins along the way.
Indeed, Shopify’s bottom line was the issue that created angst for many investors this past quarter, with various charge-offs leading to a $1.2 billion loss in the first half of 2023. Yes, this is less than half of the $2.7 billion the company lost during the same period last year. However, it’s big-time money for this high-growth stock.
Right now, it appears the market wants to see profitable growth from Shopify. I think the company is headed in this direction, but it’s likely to be a bumpy ride to get there.
What this all means
I think investing in a company like Shopify requires a certain temperament. Those who can’t stand to see double-digit losses over a short time frame should avoid this stock. Notably, SHOP stock sank more than 80% from peak to trough in very short order in 2022. That’s the kind of stomach-churning move only a small percentage of investors can hold through.
But for those taking a truly long-term view on the future of commerce, Shopify remains an intriguing bet. The company’s status as the go-to platform for small- and medium-sized businesses to set up shop is noteworthy, and I think Shopify will be able to demand more and more market share over time.
