It’s a bloodbath in the broader markets right now, with high-tech and low-tech stocks taking a nosedive last week, thanks in part to the U.S. 10-year note yield, which blasted past 5% for the first time in a long time. Indeed, we’d have to go all the way back to 2007 in the lead-up to the Great Financial Crisis to find a climate that had such high rates.
Undoubtedly, the high-growth tech stocks, like Shopify (TSX:SHOP), have been under pressure for quite some time now. The stock is sitting at around $70 and change after, down over 22% from its 52-week highs in September. Indeed, the September effect may not have died down quite yet.
As markets move into oversold conditions, it may make sense to look at the wreckage for a bargain. Indeed, this brutal market has tested the patience of many. As more people begin throwing in the towel, it may make sense to bite your lip, hold your nose, and do some buying.
Of course, buying stocks when there’s fear on Bay Street is easier said than done. Regardless, long-term investors who still believe in a firm’s fundamentals and growth story should not let emotions keep them stuck on the sidelines as the best of bargains come passing by.
Shopify stock under pressure as rate keeps surging
Though Shopify stock took a rather mild hit to the chin, falling 1.4% on Friday, I’d argue that now is as good a time as any to reconsider the bull case for the Canadian e-commerce titan. It still has a stake in artificial intelligence’s (AI) rise, with small but intriguing innovations popping up across the platform. In time, I’d bet that generative AI could be a bigger growth driver for Shopify, even before retail sales have a chance to hit normalized conditions again.
Undoubtedly, 2023 has been a year of relief for investors. Even after the recent pullback, the stock’s still up 43.6% on the year at the time of writing. Most of the recent pain in shares seems to be regarding jitters about the macro picture rather than company-specific woes. Indeed, it could take time for retail sales to heat up again. There is a likely recession around the corner, after all!
Should Shopify stock be worth more than $100 per share?
In any case, various Bay Street bulls view SHOP stock not as a buy after a recession but as a worthy pick-up today.
RBC Capital analyst Paul Treiber recently reiterated his outperform recommendation. He thinks shares could make a move toward a price target of US$80. That’s around $109 and change in Canadian dollars, or just north of 55% in upside from last Friday’s close.
Could SHOP stock really be that undervalued?
It could be. Either way, there’s a lot to love about the long-term Shopify story. Whether investors are willing to brave the rough waters en route to a more upbeat environment remains the big question.
Bottom line on Shopify stock
It’s hard to tell how deep the next recession cuts or how big of an impact it’ll have on SHOP stock from here. Regardless, I’m inclined to believe the recent rut in Shopify is more of an opportunity than a sign to run for the hills.
Timing the market is a dangerous game. But if you see a wonderful business at a decent price, it may be worthwhile to start doing some nibbling, even if you’re a bit jittery like other investors.
