No one knows what the future holds, but when it comes to growth stocks bound to continue growing, Shopify (TSX:SHOP) tops the list. Shopify stock continues to climb through 2023, currently up 89% year to date as of writing and 97.46% in the last year.
However, the company still remains volatile, with a beta currently at 2.03 looking at the last five years. As beta measures volatility over that time period, it could certainly mean that the near future could see some more ups and downs. But for the very near term, June still looks good.
Let’s see why.
Recent moves lead to growing shares
Investors were happy to see that Shopify stock has been making some major changes lately. The growth at all costs model looks like it might be going out the window, if it hasn’t already. Shopify stock announced during its last earnings report it would be focusing back on its e-commerce business and expanding into point-of-sale systems.
The stock also stated it would be making some cost-saving moves. This included laying off 20% of its workforce, mainly in management. Further, it sold its business logistics company to Flexport for a 13% stake in the company.
These moves led to a 30% increase in share price in just a day for Shopify stock. And the growth hasn’t stopped there, as analysts continue to weigh in on the potential future performance of the company. One analyst stated the full-year 2024 consensus earnings before interest and taxes of $650 million looks “significantly understated.” Instead, the full-year may end up around $1.15 billion, according to revised estimates.
Where value stands
It’s quite difficult to look at any tech stock and figure out if the company is valuable or not — especially with Shopify stock. The company hasn’t been on the market that long, only coming on the TSX back in 2015. In that time, shares exploded to $228 per share (priced for the stock split), before dropping significantly after restrictions from the pandemic were lifted.
Now, Shopify stock is back up again but still far off from that $228 share price. Does that mean it could get there again? That remains unclear, but what we can see is how value stacks up right now based on the immediate future potential of Shopify stock.
Based on the opinion of a total of 37 analysts, there are 17 that recommend the stock at a strong buy. However, there are 18 who recommend the stock as a hold. That leaves just one stating moderate buy and another a strong sell. While opinions have shifted more positive in the recent months from analyst opinions based on the influx of cash from sales and layoffs, there is certainly more room to grow. Shopify stock now has that focus on e-commerce to note, so we’ll have to see whether this move proves positive or not.
Bottom line
Shopify stock does look expensive based on fundamentals. It trades at 18 times sales and 12.5 times book value, which is higher than most of its peers. That value isn’t likely to change, so it will really be up to investors to decide whether they think Shopify stock has what it takes to get back to its roots and perform well. For now, it remains a trendy stock that is likely to just get trendier, as investors hop back on the bandwagon.
