Is Shopify Stock a Buy in 2024?

Shopify (TSX:SHOP) stock looks like a great contrarian pick-up for growth investor this May.

| More on:
online shopping

Image source: Getty Images

The recent wave of market volatility (mostly centred on tech) has made Shopify (TSX:SHOP) stock a tad cheaper. Undoubtedly, the recent 2024 pullback is just a blip compared to the great implosion of early 2022. That said, I still think growth-centric investors should continue to stand by the name as it looks to make a strong case for why it’s one of Canada’s most promising innovators.

Indeed, digital retail is not an easy place to be in. Still, Shopify has found a way to continue to post impressive growth prospects. As the firm looks to enhance its margins without taking its foot off the sales growth pedal, I think Shopify stock has a runway back to all-time highs.

At the time of writing, shares are just down over 50% from their highs. Though such highs were out of reach back in the depths of 2022, I wouldn’t be surprised if they were eclipsed in as little as three years, assuming the company gets generative artificial intelligence (AI) right.

Citi is a fan of SHOP stock and its growth

As the market waters turn back in favour of battered tech plays, I’d not rule out a continuation of SHOP stock’s rally. An analyst named Tyler Radke over at Citibank recently had encouraging things to say about the e-commerce juggernaut. He stated that the company’s Merchant Solutions business made him and his team “confident in SHOP’s long-term growth.”

Indeed, Shopify’s growth is far away from its peak, but there’s still plenty of room to keep sales rising at a good pace. Combine the firm’s innovative prospects with the potential for improving consumer trends, and Shopify stock may very well be the contrarian tech stock pick to keep atop your radar this May.

SHOP stock has had a rather sluggish start to the year, with shares up around 7% year to date. That said, the stage could be set for a better showing in the second half, as macro headwinds hopefully give way while the company has more opportunity to release intriguing new tools to its merchants.

At 13.6 times price to sales (P/S), Shopify is no value play. Heck, it may not even be a growth-at-a-reasonable-price type of play. That said, I view it as a hyper-growth stock pick that could get its mojo back on the back of some prominent tech-wide trends.

The bottom line

Though Shopify’s AI strategy may not be as refined as some of the Silicon Valley tech titans, I think that shedding more light on the firm’s investment plans could act as a massive tailwind for the stock. For now, though, I view Shopify as a firm that may prefer to let its technologies do the talking for it. Given the firm’s willingness to step outside of its comfort zone, I think the current P/S multiple is a tad on the low end.

Over the longer run, I expect that multiple to be closer to the 20 times P/S level, a multiple that’s more fitting for a firm that has years’ worth of durable growth. In short, SHOP stock is still a great buy this year. Just be ready for turbulence as earnings season rolls around.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool has a disclosure policy.

More on Tech Stocks

question marks written reminders tickets
Tech Stocks

Nvidia’s Historic Stock Split: Will Investors See Bigger Gains?

Nvidia's (NASDAQ:NVDA) record 10:1 stock split entices many investors in several important ways. But some myths aren't technically correct.

Read more »

A worker drinks out of a mug in an office.
Tech Stocks

Want $1 Million in Retirement? 3 Stocks to Buy Now and Hold for Decades

Growth stocks such as Docebo and Celsius Holdings should help you generate outsized gains in the upcoming decade.

Read more »

Male IT Specialist Holds Laptop and Discusses Work with Female Server Technician. They're Standing in Data Center, Rack Server Cabinet with Cloud Server Icon and Visualization
Tech Stocks

Missed Out on NVIDIA? My Best Growth Stock Pick to Buy and Hold

A TSX growth stock is a top pick and profitable investment choice if you missed out on the ascent of…

Read more »

grow dividends
Tech Stocks

3 Tech Stocks That Could Make You a Millionaire

Given their long-term growth potential, these three tech stocks could deliver oversized returns in the long run.

Read more »

Businessman holding AI cloud
Tech Stocks

Ready to Invest in Artificial Intelligence (AI)? 2 Stocks That Are Solid Bets

These two AI stocks provide investors with strong future opportunities as AI continues to become a part of our everyday…

Read more »

Dice engraved with the words buy and sell
Tech Stocks

Is Lightspeed Stock a Buy, Sell, or Hold?

Down 88% from all-time highs, is Lightspeed stock a good buy in May 2024 and can the TSX tech stock…

Read more »

Overhead shot of young adults using technology at a table
Tech Stocks

Forget NVIDIA: 1 Tech Stock to Buy Instead

Here’s why Shopify (TSX:SHOP) stock could be a smart long-term buy for investors willing to look beyond NVIDIA’s impressive growth.

Read more »

Lights glow in a cityscape at night.
Tech Stocks

2 Artificial Intelligence Stocks to Buy and Hold for the Next Decade

Qualcomm (NASDAQ:QCOM) and another well-placed AI stock could drive substantial capital gains over the next decade. Here's how.

Read more »