Shopify Stock Rose 22% Last Month: Is it Still a Buy in June 2023?

Shopify (TSX:SHOP) stock rose 22% in the last month but is down from 52-week highs. So, is it time to jump on this opportunity?

Amy Legate-Wolfe ❯

@amylegatewolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published June 5, 2023 2:45 pm EDT

It was one heck of a month for Shopify (TSX:SHOP) in May. Shopify stock rose a whopping 22% in the month alone, after earnings and announcement swamped investors with buy recommendations.

However, this is actually down from the initial excitement. Shares of Shopify stock jumped 30% after earnings were released, coming down about 8% since that time.

So, is Shopify stock still a buy after all this growth? Or is more of a drop to come?

What happened?

The original jump came after Shopify stock announced it would be laying off about 23% of its global workforce, mainly in the management field. Analysts believe this could create cost savings of around $270 million.

Furthermore, Shopify stock sold off its logistics business to Flexport for a 13% stake in the company. This allows the company to get back to its e-commerce roots, which it pretty much did immediately.

Shopify stock went on to announce soon after that it would be launching point-of-sale hardware across Canada. And this isn’t an easy accomplishment, given that the entire country is flooded by point-of-sale companies.

However, the hardware achieved success in the United States through its launch last year. So, while e-commerce has been great, the company believes that it now needs more in-person offerings as well. Transactions from its point-of-sale system grew 31% in the first quarter of 2023 already.

Earnings remain strong

Shares of Shopify stock are still way down from all-time highs of $228, adjusted for the stock split. Even so, better-than-anticipated results quarter after quarter have led investors to believe that all these cuts will lead to something pretty great.

Shopify stock remains with a strong position in the stock market, including in the tech sector. And all these recent changes have also led to analysts believing the stock will reach free cash flow profitability during each quarter of this fiscal year. Even so, it’s early days of this recent change. Time will tell how it all adds up.

Bottom line

Shopify stock remains a leader in the e-commerce sector and could easily edge in on point-of-sale operators in the near future as well. It continues to see massive growth in recurring revenue, gross transaction volume, and merchant revenue.

It’s now focusing on enterprise level companies as well through Shopify Plus, which has brought in incredible revenue as well. This has led analysts again and again to predict the stock to outperform its peers.

The stock now has a consensus price target of about $80, which is basically where it is on the TSX today. That is also likely why it isn’t rising much higher, as investors have been burned before.

Even so, long-term investors may want to give Shopify stock another look at these prices. When the next earnings report comes down the line, we could see shares jump just as high once more. But those shares could indeed fall a bit further before that recovery in the next few months. Only time will tell for this top e-commerce stock.