Shares of Canadian e-commerce firm Shopify (TSX:SHOP) have been skyrocketing higher (by around 20%) following the release of some much better-than-expected second quarterly earnings results. Though it’s never a wise idea to “chase” any stock after a historic single-day rally, I still view SHOP stock as prime for picking as the company lifts off the canvas.
Despite the massive double-digit percentage rally, shares are still down slighty (close to 5%) on the year. And though the road ahead could prove bumpier, especially if tech continues to be the pain trade for the rest of the year, Shopify’s latest glimmer of resilience may be worth backing while it’s still below $100 per share.
According to Martin Toner, a well-respected analyst over at ATB who has an overperform recommendation on the name, noted that Shopify’s latest beat and raise “hints at strong growth in the back half of the year.” I couldn’t agree more.
Shopify just clocked in some incredible results in an earnings season where it’s become quite tough to move the needle higher, even with outstanding numbers. Though it’s been a rather jittery round of earnings, especially for the tech scene, it’s notable that most firms have actually topped earnings.
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An outstanding Q2 number could be followed by an equally impressive Q3
That said, very few have been able to confidently guide higher. And with third-quarter (Q3) growth likely to keep going strong, investors may be wondering if the firm has what it takes to keep rising through these challenging economic conditions. As the company stays on the growth track while looking to make gains on the front of free cash flow margins, perhaps the firm could finally find itself in a bit of a sweet spot.
Of course, consumer spending has been rather muted this time around. But with no shortage of incredible innovations in the pipeline (including generative artificial intelligence, or AI, tools for merchants, as I’ve mentioned in prior pieces) and the ability to keep gaining share in a colossal total addressable market, it’s definitely tough to bet against the founder-led Canadian tech sensation right here. Not after it’s seemingly regained its quarter-crushing edge.
With numerous analysts upgrading the name in recent weeks, the earnings bar has been raised. Still, I’m inclined to view Shopify as one of those must-own Canadian tech firms for investors who want AI-driven growth but don’t want to have to venture south of the border at today’s exchange rates.
Heck, given the fickleness of the mega-cap tech trade in recent weeks and the greenback’s relative strength, I’d argue that it makes more sense for U.S. investors to head north of the border for tech this time of year.
The Foolish bottom line on Shopify stock
In any case, Shopify is back on the profitability and growth tracks, and with shares going for just 64.1 times forward price to earnings, perhaps nibbling at a few shares here makes sense. However, I would look to be a bigger buyer should a pullback toward $80 per share be in the cards between now and the year’s end. If the market selloff gravitates lower again, perhaps dip-buyers will be granted such an opportunity.
