Shares of top Canadian e-commerce sensation Shopify (TSX:SHOP) broke the $100 per-share milestone briefly back in mid- to late August, only to succumb to the brutal market-wide plunge that followed. Now going for just shy of $95 per share, the tech darling seems like a rather intriguing dip-buy, even as the U.S. markets lead the way lower going into mid-September.
Undoubtedly, Shopify stock isn’t guaranteed to trend higher over the next month, quarter, or even the next year. That said, the company’s longer-term (think the next five years out) growth narrative still seems intact.
In fact, I’d argue that the growth profile stands to improve by leaps and bounds from here as the firm leverages generative and predictive artificial intelligence (AI) in a way to further improve its platform and add to the already wide economic moat.
Shopify’s predictive AI solutions look promising!
Indeed, generative AI has been all the buzz in the past two years. The buzzword has been difficult to avoid, even if you’re looking at businesses outside the tech sector!
Undoubtedly, there’s a big opportunity for firms to unearth value as they tap into a technological force, the likes of which may only be matched by the rise of the internet. Just as there were massive winners and losers that walked away from the dot-com bubble, there will be top dogs and duds that will emerge in the coming years and decades.
For investors willing to play the long-term game, however, I believe the rewards from the winners could potentially dwarf the losers’ losses.
That’s why it’s always a good idea to spread your bets and ensure you’re diversified across a range of names that you believe can “win” this so-called race to AI supremacy. It’s not just generative AI that could lead to impressive double-digit growth in the coming years, however.
Predictive AI: Shopify’s big advantage?
Arguably, predictive AI, AI that can help make forward-looking sales forecasts and demand projections, may help unlock even more cost savings for small- and medium-sized businesses. Currently, Shopify has such predictive tools in its arsenal. Over time, however, expect such tools to improve as the models learn the ropes with certain businesses on the platform.
Undoubtedly, a smaller firm with limited access to capital must invest deliberately, especially in this high-rate climate.
Though the Bank of Canada followed through this week, delivering its second interest rate cut while also signalling more to come, don’t expect firms to start spending aggressively with little to no regard for the return to be generated. This era of high rates is a reminder to all firms that every investment dollar needs to be spent as though credit is tight.
The bottom line on Shopify stock
With Shopify back on the retreat, growth investors should look to punch their ticket on weakness, even if they’re in the belief that September will bring about a vicious correction for tech plays.
After the latest dip, SHOP stock goes for around 50 times forward price to earnings. It’s not a steal by any stretch. But given its invaluable data trove that could pave the way for incredibly accurate generative and predictive AI, I’d be inclined to view the premium as justifiable, even modest, compared to the magnitude of long-term growth that could be in the cards over the next five years.
