Holding This Long-Term Tech Star Makes Sense

Shopify (TSX:SHOP)(NYSE:SHOP) has remained one of the hottest buys on the market for the past few years, but could the incredible growth story finally be slowing?

| More on:

Since exploding onto the market and ushering in its suite of configurable, scalable and mobile storefronts, Shopify (TSX:SHOP)(NYSE:SHOP) has impressed investors and the overall market with increasing frequency.

Whether it was smart acquisitions that greatly expanded its product portfolio, or sustaining its record of providing double-digit growth, Shopify has remained on the forefront of any investor that is even remotely pursuing an investment in the tech sector.

Could that incredible growth story be approaching a hiatus? Has Shopify’s incredible ascension outpaced the overall market to the point that prospective investors should wait for a dip?

Let’s try to answer that question.

Shopify’s opportunity remains massive…and everyone knows it

Shopify remains one of the innovative and disruptive entrants into a segment of the economy that intersects technology and commerce. In short, Shopify’s storefront suite allows customers to very quickly setup an online storefront, customize it to the individual needs of that customer in a fraction of the time that traditional digital storefront efforts required.

In addition, Shopify offers a suite of add-on services that expand that offering to encompass areas such as customer support, reporting and inventory control, effectively blanketing its customers from the cradle to grave of the buying process.

It’s no surprise, then, how Shopify has amassed a portfolio of over 600,000 active Shopify storefronts that have seen $82 billion worth of sales traverse its platform since beginning operations just thirteen years ago.

That incredible growth story has made the stock incredibly popular among investors, and for good reason. Over the course of the past few years, Shopify has been among the best- performing stocks on the market, soaring over 500% in a little over three years. This year, the stock is already up over 20%, and even with the disastrous end to 2018 that saw many portfolios dip into the red and push investors toward defensive investments, Shopify is still holding out with an over 50% gain over the course of the trailing 12-month period.

Could it be time to hold off on buying?

Shopify’s incredible rise to fame has attracted its fair share of critics over the years.  Among those concerns that are often stated is that Shopify needs to finally make some money. Despite those impressive usage numbers I mentioned above and Shopify’s over $25 billion current market cap, the company is still very much in a start-up mode, reinvesting heavily into products growing its base.

By example, the most recent quarterly numbers available noted a net loss of $23.2 million, or $0.22 per share, down considerably from the net loss of $9.4 million, or $0.09 per share loss reported in the prior year.

In that same period, Shopify did manage to see total revenue post a gain of 58% over the same quarter last year, while also realizing strong growth in both subscription revenue and merchant solutions of 46% and 68%, respectively.

That’s incredible growth, but some could argue that the stock is riding high on the hopes and emotions of investors at the moment, not unlike the run up on cannabis stocks leading to legalization.

With results for the next quarter due to come out over the next week, an earnings miss or slowing growth could lead to the stock price retreating.

In short, Shopify is still a great long-term investment with years of solid growth ahead, but existing or new investors contemplating whether to buy the stock may want to wait for the next set of quarterly numbers next week before making a commitment.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and Shopify. Shopify is a recommendation of Stock Advisor Canada.

More on Tech Stocks

Investor wonders if it's safe to buy stocks now
Tech Stocks

Balancing the Risks and Rewards of Investing in AI Stocks

Choosing a safe AI stock can be challenging if you need help understanding the underlying technology, business model, and, by…

Read more »

An investor uses a tablet
Tech Stocks

1 Top Tech Stock That’s a Top Pick for Canadian Investors in November

Amazon (NASDAQ:AMZN) is a top AI stock that's on sale after a recent plunge off highs.

Read more »

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

An investor uses a tablet
Tech Stocks

Canadian Tech Stocks to Buy Now for Future Gains

Not all tech stocks are created equal. In fact, these three are valuable options every investor should consider.

Read more »

dividend growth for passive income
Tech Stocks

2 Rapidly Growing Canadian Tech Stocks With Lots More Potential

Celestica (TSX:CLS) and Constellation Software (TSX:CSU) are Canadian tech darlings worth watching in the new year.

Read more »

BCE stock
Tech Stocks

10% Yield: Is BCE Stock a Good Buy?

The yield is bigger than it's ever been in the company's history. That might not be a good thing.

Read more »