Shopify (TSX:SHOP) has been one of the most talked-about stocks since its initial public offering (IPO). Most of this talk has been good. Over the first six or so years of Shopify’s existence on the public markets, the stock gained more than 6,000%! In fact, its growth from 2017 to 2020 was so impressive that Shopify stock listed as the best performer on the TSX between that period. To further put this market dominance into perspective, Shopify stock’s growth over that time nearly equated to the gains generated by the three next best-performing stocks combined.
However, last year, a lot of the talk surrounding Shopify turned negative. Like many other growth stocks, Shopify was negatively affected by the economic conditions in 2022. A lot of this had to do with the rising interest rate. As that rate grew higher, investors become more hesitant to invest in growth stocks. As a result, growth stocks saw their values plumet. Shopify experienced a drop in value of as much as 83%!
Today, however, Shopify stock is in a much better position. The stock still sits more than 70% lower than its all-time highs. However, the stock has rallied more than 60% from its lowest point in 2022. With that said, is it time to buy Shopify stock?
Should investors be buying Shopify stock today?
In my opinion, it’s an excellent time to be buying shares in Shopify. With a recent rally of more than 60%, institutional investors have shown that they’re willing to support this stock moving forward. In addition, Shopify continues to be one of the biggest players in the global e-commerce industry.
In its most recent earnings presentation, Shopify reported US$5.6 billion in revenue for fiscal year 2022. That represents a year-over-year increase of 21%. In addition, the company claimed a 10% share of the massive U.S. e-commerce market, with further plans to increase penetration.
Shopify has been able to become such an important player in the e-commerce market thanks to the establishment of its enterprise partnership network. By giving its merchants access to the likes to YouTube, Spotify, Walmart, Meta Platforms, and more, its merchants always have the opportunity to land their stores in front of consumers.
As the e-commerce industry continues to grow, I expect Shopify to grow alongside it. It’s previously been forecasted that the industry could experience a compound annual growth rate of 14.7% from 2020 to 2027. If that’s the case, then the industry leaders could see much larger growth than that industry average. This bodes well for Shopify’s future.
For better or for worse, Shopify has been one of the most talked-about stocks on the TSX since its IPO. This stock has seen its fair shares of high and lows. Following a very difficult 2022 for Shopify, the stock has started to rally, gaining more than 60% from its lowest price point last year. I believe it’s an excellent time to be buying shares, on the back of that excellent rally. Investors will still have an opportunity to buy shares at a discount, as Shopify stock currently trades about 70% lower than its all-time highs.