With the Canadian stock market touching new heights, many long-term investors may find it difficult to identify stocks with solid growth potential that haven’t already skyrocketed. While the TSX Composite benchmark has surged by 14.3% so far in 2024, some fundamentally strong growth stocks, like Shopify (TSX:SHOP), are still underperforming the broader market. Despite Shopify’s position as a leader in the e-commerce space, its stock performance has lagged in 2024, raising the question: is Shopify stock still a no-brainer buy at current levels?
Let’s take a closer look at Shopify’s recent financial performance and long-term growth potential to find out whether now is the right time to invest in this Canadian tech giant.
Shopify’s financial growth remains impressive
Although Shopify stock is underperforming the market this year, it doesn’t mean it’s a company to overlook. In fact, the Canadian e-commerce platform provider’s financial performance remains robust in 2024, signalling that its underlying business continues to thrive.
In its second quarter of 2024, Shopify posted a solid 21% YoY (year-over-year) revenue growth to US$2 billion, driven by strong demand for its services. After adjusting for the sale of its logistics businesses, the growth rate jumps to 25% YoY. This impressive increase, despite the ongoing macroeconomic challenges, highlights Shopify’s resilience and adaptability in a competitive market environment.
Additionally, the total value of transactions processed through Shopify’s platform or its gross merchandise volume (GMV) rose by 22% YoY to US$67.2 billion. This surge in GMV indicates that more merchants are choosing Shopify to power their e-commerce businesses, even as consumer spending remains weak. Similarly, the company’s payment processing solution continues to gain traction. Its gross payments volume (GPV) grew to US$41.1 billion, accounting for about 61% of its total GMV. This steady adoption underscores Shopify’s ability to embed itself deeper into merchants’ operations, solidifying long-term relationships.
Beyond top-line growth, Shopify’s profitability metrics also look strong. In the latest quarter, the Ottawa-based company’s gross profit jumped by 25% YoY to US$1 billion, while its gross margin expanded to 51.1% from 49.3% a year ago. Besides other favourable factors, Shopify’s recent strategic decision to exit the logistics business has helped improve its profitability.
Is Shopify stock still a no-brainer to buy today?
Despite its strong financial growth trends, SHOP stock currently trades with a less than 4% year-to-date gain at $107.11 per share and a market cap of $138 billion. However, this underperformance offers a potential buying opportunity for long-term growth investors, especially those who want to benefit from Shopify’s solid fundamentals and the rapidly expanding e-commerce market.
Recently, Shopify has increased its focus on integrating artificial intelligence (AI) based tools and services into its platform, further strengthening its value proposition for merchants. The company has been leveraging AI tech to help merchants optimize their operations, from automating customer support to offering personalized shopping experiences.
As the global shift towards online shopping continues to accelerate in the years to come, I expect Shopify’s dominance in the e-commerce space to strengthen further, making it a no-brainer stock to buy now and hold for years.
