Tech Selloff: 1 TSX Stock Down 76% to Buy Before it Roars Back

Shopify is a TSX tech stock that is down 76% from all-time highs. But is SHOP stock a buy right now?

| More on:
A data center engineer works on a laptop at a server farm.

Source: Getty Images

The ongoing bear market has been the defining characteristic for equity investors in 2022. It has been the worst downturn for Bay Street in more than a decade, with growth stocks trading significantly below all-time highs.

The tech-heavy Nasdaq Composite index is currently trading 31% below record highs, while tech stocks on the TSX, such as Shopify (TSX:SHOP), have declined by more than 75%. But there is a hint of a silver lining amid all the chaos. For instance, investors can now buy quality companies at cheaper multiples that might rebound once market sentiment improves.    

So, disciplined investors have the opportunity to generate exponential wealth in the current bear market. With these factors in mind, let’s see if Shopify is the perfect contrarian bet for investors right now.

Created with Highcharts 11.4.3Shopify PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

Shopify is part of the e-commerce market

While the COVID-19 pandemic initially acted as a massive tailwind for Shopify and other e-commerce peers, the reopening of economies triggered a deceleration in online shopping this year. In addition, rising interest rates and inflation have weighed heavily on consumer demand in 2022, again impacting the top line of Shopify.

Shopify’s sales rose by 20% year over year in the first nine months of 2022. Comparatively, revenue growth stood at 86% in 2020. Despite the deceleration in 2022, Shopify has expanded its sales at an annual rate of 52% in the past three years.

Due to its lofty valuation and a volatile stock market, Shopify shares experienced a massive selloff in the last 12 months.

However, over the long term, the global e-commerce market is forecast to touch US$5.4 trillion in 2026, accounting for 27% of total retail sales, up from US$3.3 trillion in 2022, according to a report from Morgan Stanley. Comparatively, Shopify sales are estimated to rise from US$5.5 billion in 2022 to US$8.3 billion in 2024, as per consensus estimates.

Shopify is already one of the largest players in the e-commerce segment, accounting for 10% of the gross merchandise volume in the United States, second only to Amazon. Additionally, around a third of e-commerce sites south of the border is powered by Shopify, indicating it enjoys a wide economic moat.

What’s next for SHOP stock price and investors?

Shopify’s high operating leverage allowed it to report adjusted profits in the last two years. But it swung to a loss in 2022 due to foreign exchange headwinds and rising operating expenses.

Shopify has invested heavily in developing a vast network of fulfillment centres, which should drive future cash flows higher. But its earnings before interest, tax, depreciation, and amortization might fall to -US$61.75 million this year before improving to US$358 million in 2024.

Similar to several other tech stocks, Shopify is looking to lower its cash-burn rates and reduced its headcount by 10% in recent months.

SHOP stock is currently priced at 7.2 times forward sales, which might seem quite steep, given it’s struggling to deliver consistent profits. There is a good chance for SHOP stock price to fall lower, especially if macro conditions worsen in the near term.

But Shopify’s market-leading position, rapidly expanding addressable market, and steep pullback make it a top TSX tech stock to buy right now.

Should you invest $1,000 in Bank of Nova Scotia right now?

Before you buy stock in Bank of Nova Scotia, 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 Bank of Nova Scotia 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 $21,345.77!*

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 24 percentage points since 2013*.

See the Top Stocks * Returns as of 4/21/25

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.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Amazon.com. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Tech Stocks

Tech Stocks

The Smartest Tech Stock to Buy With $4,000 Right Now

Down almost 50% from all-time highs, this tech stock offers significant upside potential to shareholders in May 2025.

Read more »

Income and growth financial chart
Tech Stocks

2 Canadian Stocks That Could Turn $10,000 Into $100,000

If you're looking for growth and income, these two are some of the best options out there.

Read more »

money goes up and down in balance
Tech Stocks

1 Magnificent Tech Stock Down 27% to Buy and Hold Forever

Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) is starting to look severely undervalued after its latest drop!

Read more »

ways to boost income
Tech Stocks

1 Undervalued TSX Stock Down 18% to Buy and Hold

This TSX stock remains down but is due for a huge comeback for investors.

Read more »

grow money, wealth build
Tech Stocks

This TSX Stock Down 20% Could Triple Your Money by 2028

Down 20% from its 52-week high, this TSX stock is positioned to more than triple investor returns over the next…

Read more »

money goes up and down in balance
Tech Stocks

The Smartest Canadian Stock to Buy With $600 Right Now

The Canadian stock market has some big winners trading at discounted share prices, ripe for the taking, and here’s one…

Read more »

Muscles Drawn On Black board
Dividend Stocks

The Best Canadian Stocks to Buy Right Away With $4,000

Seeking strength from your investments? Then these are the three stocks to consider first.

Read more »

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

Where Will BlackBerry Be in 4 Years?

With fresh partnerships and a tighter focus, BlackBerry is trying to lay the foundation for long-term growth.

Read more »