As far as Canadian growth stocks are concerned, Shopify (TSX: SHOP) continues to be a top option many investors look to for exposure to secular growth trends. The e-commerce giant has historically benefited from strong online shopping growth relative to physical retail. The pandemic certainly boosted these trends, though we’ve also seen strong organic growth continue outside of the pandemic.
I’m of the view that Shopify’s global business model and plethora of verticals should provide long-term upside for investors willing to buy the dip. This is a company with a valuation multiple that’s come down considerably in recent years, in part due to the multiple compression we’ve seen in the market. Additionally, Shopify’s recent growth has made its share price much more attractive.
So, with that in mind, let’s take a look at whether Shopify is a buy through a bullish lens right now.
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What’s going right for Shopify?
Shopify’s status as a leading e-commerce platform provider has allowed the company to produce growth rates well in excess of the overall market for years. However, as the company’s growth rate has slowed following an incredible pandemic boom, its valuation has come down as well. Currently trading around 62 times forward earnings, many investors could argue this is a company that’s much more attractively priced now than it has been in some time.
That’s certainly a positive for investors looking for top-tier growth stocks to buy. That goes double for those who think the company’s growth rate can accelerate from here.
I’ll be looking to see how Shopify’s bottom-line performance comes in, as well as the company’s margins, in the coming quarters. If Shopify can prove it’s able to grow without the requisite CapEx and operational spending that typically comes with past growth cycles, this is a company worth considering right now.
It’s all about the company’s ecosystem
Much like other top-tier tech stocks that have fallen out of favor with many investors, I think going back to basics matters the most for this company. What Shopify has generated in its more than a decade as a traded entity is an incredible ecosystem that has resulted in a very sticky customer base. If the company can avoid churn and continue to add more customers as the global e-commerce trend continues, this growth could be very sustainable.
Again, we’ll have to see how everything shapes up in the coming quarters. Many in the market are bracing for a recession, or at least a protracted growth downturn.
That said, if we do see global growth continue to remain robust, this is a growth stock that certainly looks attractive under $150 per share right now.
