Forget Shopify (TSX:SHOP): This Growth Stock Has Much More Potential

Shopify Inc. (TSX:SHOP)(NYSE:SHOP) has had quite the run, but after another wave of analyst warnings, it might be time to consider this other high-growth stock.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you invested in Shopify (TSX:SHOP)(NYSE:SHOP) sometime last year, you’re probably feeling pretty darn good about yourself right now. After reaching about $200 per share and then sinking down to about $160, the stock has since risen, and risen quickly. Since the new year, Shopify has grown an incredible 103%, reaching an all-time high of about $445 per share in the last month.

But again and again, analysts have been warning investors about the company’s valuation. While the firm is incredibly strong and set up for further gains in the future, it has yet to make a profit. Its value is taken into consideration with analyst estimates, and those estimates put the stock’s worth at around $210 per share. That’s about half of where it traded only about a week ago as of writing. In fact, should a recession hit, this stock could drop like a hot stone.

Now, if you’ve invested in Shopify, you don’t need to sell this strong company set up for a huge future. However, if you’re looking for another company with huge growth potential, I would recommend Open Text (TSX:OTEX)(NASDAQ:OTEX).

This stock has been growing steadily for the last few decades, with some serious jumps in the last few years. Even just a decade ago, the stock was trading at about $10.50 per share compared to today at around $55 per share — an amazing increase of about 425%.

But analysts believe this stock is setting itself up for even more future growth, starting with two recent cloud-based acquisitions made with its steadily increasing cash flow. Once these acquisitions come online, free cash flow should increase even further for this software company.

The cash will help the company continue to payout its solid dividend yield of 1.72% as of writing — something Shopify doesn’t offer. That dividend is also safe, as the company is in a sector that isn’t going anywhere any time soon. The company designs, develops, markets, and sells enterprise information management (EIM) software and solutions — an industry worth about $40 billion. It’s also an industry safe from trade wars, fluctuations in markets and the like, as the entire world is so dependent on software systems running smoothly. The only thing Open Text depends on is its own performance.

That performance looks great for the foreseeable future, given that the firm generates about $2.5 billion in annual recurring revenue, with 75% of it coming from total annual sales. In its latest quarter, total revenue increased 5% year over year, operating cash flow 6%, and EBITDA a solid 15% compared to the same quarter last year. The stock has also brought down its level of debt to net worth from 85% to 68.2% in the last five years.

Foolish takeaway

While Shopify can be an exciting stock to get behind, it definitely needs to come down again before it gets any more of my money. Meanwhile, Open Text offers investors another strong growth opportunity with a dividend that will keep you coming back for more. Also, the stock has a longer history of strong share increases, and coupled with a strong balance sheet, this should make investors eager to pick up this stock.

In fact, if you were to buy and hold this tech stock for the next 10 years, an investment of $5,000 could be worth about $21,620 in that time. Of course, these are only recommendations, but if you’re looking for a strong stock with a steady future, Open Text belongs next on your potential buy list.

Should you invest $1,000 in CIBC right now?

Before you buy stock in CIBC, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and CIBC wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,750.10!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/22/25

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 Amy Legate-Wolfe 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 and Open Text are recommendations of Stock Advisor Canada.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Tech Stocks

data center server racks glow with light
Tech Stocks

Why Hive Could Be the Best Stock to Buy in January 

Bitcoin is trading at its all-time high. However, Hive’s stock continues to trade in the lower range, creating a buying…

Read more »

Rocket lift off through the clouds
Tech Stocks

Could MDA Stock Deliver Big Returns Over the Next 5 Years?

Besides surging demand for space technology, its proven execution capabilities could help MDA Space stock deliver solid returns over the…

Read more »

e-commerce shopping getting a package
Tech Stocks

Why Shopify Could Be the Hottest TSX Stock in 2025

Shopify (TSX:SHOP) stock could lead the TSX higher this year!

Read more »

think thought consider
Tech Stocks

Where Will Celestica Stock Be in 3 Years?

Here’s why I wouldn’t be surprised if Celestica stock maintains its solid upward trajectory over the next three years.

Read more »

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

Billionaires Are Dropping Apple Stock and Buying This TSX Stock in Bulk

Let's be clear: there's nothing wrong with Apple stock. But investors may not get the value they can from this…

Read more »

data center server racks glow with light
Tech Stocks

OpenText Stock: Buy, Sell, or Hold in 2025?

OpenText is a TSX tech stock which trades at a cheap multiple while offering a tasty yield to shareholders in…

Read more »

Income and growth financial chart
Tech Stocks

This TSX Stock Has Already Soared 151%: Can it Double in 2025?

Whether MDA stock doubles again in 2025 will depend on consistent execution and broader market conditions, but it certainly seems…

Read more »

e-commerce shopping getting a package
Tech Stocks

Opinion: This Is the Only TSX Growth Stock to Own for the Next 5 Years

Here's why Shopify (TSX:SHOP) looks like a top growth stock worth owning over the next five years on a relative…

Read more »