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.
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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.
