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

A plant grows from coins.
Tech Stocks

3 Growth Stocks Wall Street Might Be Sleeping on, But I’m Not

Don’t miss your chance to load up on these three beaten-down stocks.

Read more »

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

money goes up and down in balance
Tech Stocks

1 “Magnificent 7” Stock I’d Buy Over Nvidia Right Now

Here's why Meta Platforms stock is a better choice for Canadian investors compared to Nvidia in November 2024.

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

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

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

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »