Not many stocks are able to recover from a sell-off that wipes out nearly 85% from peak to trough. Shopify (TSX:SHOP) stock pretty much completed its comeback after delivering an incredible blowout result for its second quarter (Q2). Indeed, the impressive results sent shares of SHOP up more than 20%. And while the easy money may have already been made, with the stock flirting with new all-time highs, I think that the firm stands out as an intriguing breakout play right here. Indeed, it’s not easy to chase a stock after its historic melt-up moment.
But given the magnitude of the latest upside surprise and the artificial intelligence (AI) driven catalysts that could act as a real booster to growth and margins, I wouldn’t be so quick to throw in the towel at north of $200 per share, just because of the incredible gains in the rearview mirror. In the past year, the stock has been up 136% or around 175% in the last two years.
Undoubtedly, such a pace of gains just isn’t sustainable. And while shares look pricey and overdue for a pullback, I think that the earnings numbers were good enough to justify the double-digit percentage surge on Wednesday’s upbeat session. Though a tech sell-off may not be too far off, I think any dips between now and year’s end ought to be viewed as more of a buying opportunity than a sign it’s time to take profits.
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Shopify delivers an applause-worthy quarter for the record books
For Q2, Shopify saw revenues surge 31% year over year. That’s some serious growth in an environment where the consumer isn’t exactly in the ideal spot. Regardless, the company’s big bottom-line beat and upbeat guidance for the next quarter, I think, is a sign that the great Canadian growth stock is back, and it’s more than buyable again despite the seemingly elevated valuation metrics.
Perhaps the top reason to buy SHOP stock as it eyes new all-time highs is its potential to grab even more market share away from rivals. Add its AI innovations and ability to expand further into new verticals (think payments) into the equation, and it’s clear that the Canadian tech juggernaut has more than one growth lever to pull. If the company can keep taking share while expanding its total addressable market (TAM), which is already quite massive, I see numerous scenarios where SHOP stock still proves too cheap right here at close to all-time highs.
Shopify stock is getting pricier, but powerful growth engines do not come cheap
At 84.1 times trailing price to earnings (P/E), shares of the e-commerce sensation are not cheap after their post-Q2 melt-up. Waiting for a near-term pullback could prove wise, but for new investors, I wouldn’t be against buying at over $200, given management’s AI ambition. In prior pieces, I highlighted that it was time to view Shopify as an AI company. As the firm leads the way in e-commerce with more of an AI-first mindset, it will be very interesting to see where the firm goes by the year’s end. Personally, I think Shopify will make good on its growth promise, as the latest quarter inspires more analysts to get in the bull camp.
