The year 2023 has been great for the tech sector in Canada (so far). The TSX tech index is up 31.5% since the beginning of the year, and if you pick an earlier starting point — i.e., Oct. 2022, the growth seems even more substantial at 53%. This has had a powerfully positive impact on a number of underlying stocks, including the e-commerce giant Shopify (TSX:SHOP).
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Shopify recovery journey
After one of the most glorious bullish phases in the history of the TSX, which turned Shopify into the most valuable company in the market (for a while), the stock fell hard. Between its Nov. 2021 peak and its Oct. 2022 depth (less than a year), the stock lost about 83% of its market value.
Few investors still counted it among the top stocks in Canada, but even though it had lost a lot of its market value, it still retained many of its strengths.
The stock has started its recovery journey, almost in sync with the tech sector. It has more than doubled in value between Oct. 2022 and June 2023, and in this year alone, the stock has risen by about 68%. We have yet to see how long this growth spurt will last.
It may have been a sector-oriented boost destined to wane over time. Or, as time may tell, it is the starting point of a long-term bullish phase that may restore the stock close to its former glory.
Even though the stock’s journey into 2023 has mostly been that of recovery, it hasn’t been very consistent. If the pattern continues in the long term, investors may experience growth, but it won’t be on par with the explosive growth this stock offered in the past.
The company
It’s still one of the largest companies in the global e-commerce space that offer comprehensive services and tech tools to businesses that are looking to establish an e-commerce presence. The Shopify platform triggered the development of an entire ecosystem made up of thousands of tools, applications, application programming interfaces, and other services that relied upon Shopify.
The company has consolidated about 10% of the U.S. e-commerce market and is used by millions of merchants in over 170 countries around the globe. Its basic revenue stream is the subscriptions paid by the users, so if it can manage to hold on to its existing customers and grow the customer base by a modest level each year, it may remain financially viable and even become profitable.
Foolish takeaway
Thanks to the recovery of the sector, many tech stocks are worth buying in June 2023. However, Shopify stands out from the others for a few reasons. The stock was brutalized during the sector’s correction, so even if there is a modest chance that the stock may reach its peak valuation in the next bullish phase, it triggers investor attention.
