Investors in Shopify (TSX: SHOP) have certainly had their ups and downs. Quite literally. While it took about four years for Shopify stock to seriously pick up, it took far less for shares of Shopify stock to drop into oblivion.
Yet this year, Shopify stock seems to be making a recovery. And it has me wondering, is this the beginning of another drop? Or a more sustained climb for investors? Today, let’s dig in.
Back from the brink
Shopify stock looked like it was on the brink of disaster only about a year ago. After shares hit all-time highs of $228 (adjusted for the stock split), they collapsed to $33. This was a drop of 86% before starting to slowly, but surely, climb once more.
Shares of Shopify stock today are now up by 127% since that time. But it’s still quite the ways away from where it was in its heyday. And it comes down to owning up to mistakes, and investors still hoping for more.
During the last few earnings reports, management for Shopify stock made several rounds of cuts to bring in cost savings. The company also made statements surrounding where its future was headed, and that was back to e-commerce. No more trying to be everything in the e-commerce world. It was back to what the company was good at.
What this means for the future
Investors and analysts alike have been quite pleased with the news. Furthermore, earnings seem to reflect that it was the right move to make. By selling its logistics business, the company brought in more cash flow to help get it back on track. What’s more, the company is focusing on how it can make its products easier and better for its merchants.
This move includes creating artificial intelligence options for its clientele, along with payment options. This includes Shopify Credit, Shopify Collective, and Shopify Magic. All of these elements allow merchants to spread their products far and wide easily. As long as they’re using Shopify.
The company reported another strong quarter, with the second quarter seeing increases across the board. Gross merchandise volume was up 17% year over year to $55 billion, with total revenue up 31% to $1.7 billion. Merchant solutions revenue increased 35% compared to 2022 levels, with gross payments volume up to $31.7 billion. Shopify stock continued to boast rising recurring revenue each month, with a gross profit now up 27% to $835 million compared to the year before. That being said, it still reports an operating loss of $1.6 billion, down from $1.7 billion last year.
Still a great long-term hold
The key here is that Shopify stock made stellar changes to its bottom line, and learned it’s going to have to focus on what it knows. This is what made the stock such a popular one to begin with, and could be how it continues to see jumps in share price down the line.
Yet, right now, it’s still a fraction of the share price compared to its highest levels. In that respect, Shopify stock looks like a buy right now. Especially if you’re an investor seeking a long-term hold. This could be like buying a FAANG at the very beginning, or during a dip! Only time will tell.
