Shares of Shopify (TSX:SHOP) fell this month as the tech stock reported earnings that, while strong, provide weaker guidance. Shopify stock has been burned before from providing the promises of greatness, only to see earnings drop.
So while the company certainly should continue to do well, investors may want to consider other tech stocks instead.
What happened
The key to finding a strong tech stock then is to identify the weakness in Shopify stock, and find another that is providing strength. Shopify stock reported sales in the first quarter at US$1.9 billion, an increase from the US$1.5 billion reported last year. It also reported a net loss of US$273 million, after a profit of US$68 million back in 2023.
Yet what caused shares to drop by up to 21% was the outlook. While consumer spending in North America should remain resilient, management said, sales growth is expected to slow in the second quarter. Shopify should achieve growth in the high-teens percentage on a year-over-year basis. This would be down from the average growth of around 26%.
The quarter would therefore be the slowest in the last two years. So with that in mind, perhaps there is another tech stock with high sales on the way that investors should consider.
WELL Health stock
While not an e-commerce company, WELL Health Technologies (TSX:WELL) is certainly a tech stock that investors may want to consider. The healthcare stock recently reported earnings that saw its share price jump by about 10% after its release.
This comes as the tech stock reported record quarterly revenue and record net income in the first quarter. What’s more, it announced an increase of its guidance both for 2024 and 2025.
So now, the company expects to achieve annual 2024 guidance between $960 and $980 million in revenue. Furthermore, it should achieve adjusted earnings before interest, taxes, deprecation, and amortization (EBITDA) between $120 and $130 million in 2024.
Bottom line
While Shopify stock may seem like a great investment these days and should come back after this second quarter, WELL stock is up right now. The company continues to see more growth through acquisitions, as well as from organic growth. After years of picking up company after company, and expanding its use both in Canada and the U.S., it’s now on the path forward.
Shopify stock meanwhile is seeing less growth for the next quarter, and potentially for the year ahead. While I wouldn’t exactly forget it completely, there could be a dip in the future that would warrant investors buying once more. For now, however, it seems as though WELL stock is the better option. Especially with shares rising higher and higher, rising by over 10% after earnings. And that’s compared to the earnings slump from Shopify stock, as shares dropped by over 20%.
As always, investors should do their own research before buying a stock. And always consider your own goals before making any investment decisions.
