Shares of Shopify (TSX:SHOP) have had quite the steep ups and downs over the past couple of weeks, to say the least. And while the elevated levels of volatility are a given when it comes to the e-commerce tech firm, which sports a high 2.8 beta (which has a higher correlation to the broad market), I still think that the choppy moves are worth riding out if you’re a believer in management and the long-term AI-driven growth story at hand.
With shares of Shopify sailing past Black Friday and landing in a rather difficult spot, seemingly halfway between the lows of the November correction and 52-week highs, investors must ask themselves what the path forward will be now that some growth investors are getting a bit more muted when it comes to the AI trade. Perhaps AI stories are no longer sufficient to propel the share prices of AI innovators much higher over the intermediate term.
Either way, I think long-term investors have time to wait for AI to go beyond talk. As it walks the walk, especially in the case of firms that are actively applying AI to improve various aspects of the business (think Shopify), I think there’s tremendous long-term value to be had by those willing to brave the AI-driven dips. It won’t be easy, though, especially if you keep hearing the term “bubble” being thrown out ad nauseam. In any case, I think Shopify stands out as a potential AI value play going into the new year.
Don’t forget about the potential for AI-driven sales!
With a smart deal in place with OpenAI, announced just a few months ago, I think investors are forgetting the potential impact of the technology on Shopify’s growth profile. Of course, OpenAI has not been a source of bullishness of late.
Arguably, investors have gotten quite bearish on the name, probably because ChatGPT is running the risk of falling behind. Either way, OpenAI has its fair share of issues, which, I believe, will not weigh down Shopify. At the end of the day, Shopify can partner with just about any AI, especially as models become more commoditized and the AI benchmarks change with time. In a prior piece, I highlighted the OpenAI deal as a low-risk opportunity that could accompany high rewards. I haven’t changed my tune since the announcement of the exciting collab.
As Shopify looks to allow for products to be sold directly through ChatGPT, I do think potential merchant sales could be markedly higher over the next year, especially as shopping through chatbots becomes more of a thing. I think it’s the start of a rising trend. Even if it doesn’t become the new way people shop, Shopify might not have all too much to lose anyway, given it enables merchants to sell on its incredible platforms, which are becoming better and easier to build as new AI tools come to be.
Bottom line
Though it could take some time for AI sales to blast off, I do think that long-term investors have plenty of incentive to be patient, especially as we hear less about Shopify’s long-term AI potential. At the time of this writing, SHOP stock is a bit on the pricey side at over 117 times trailing price-to-earnings (P/E). However, I think the 11% discount to 52-week highs is worth pursuing as long as you’re willing to not be frightened out of the name by the next volatility spike.
