Up 17% in a Month, Is Shopify Stock a Buy Today?

Shopify stock (TSX:SHOP) has had a hard few years, and next year could be difficult as well. But at Investor Day, analysts were on board with more growth.

Amy Legate-Wolfe

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 December 20, 2023 9:00 pm EST

| More on: SHOP

Shares of Shopify (TSX:SHOP) remain up by 17% in the last month as of writing, with the company seeing massive share growth over the last year. Year to date, the ecommerce company has enjoyed growth of 97%, almost doubling in share price to over $100 per share.

But can it last? Today, let’s look at where this growth has come from, and what investors can expect in the future.

Happy shoppers look at a cellphone. — Source: Getty Images

From pandemic to profit

Shopify stock had a heck of a last few years. Shares surged to all-time highs at $228 per share (adjusted for a stock split) before falling dramatically in 2021. The company was one of many tech stocks that saw a drop in share price, and Shopify stock had to respond.

The ecommerce stock ended up selling assets such as its logistics business to Flexport for a 13% stake in the company. It also went through a few rounds of layoffs. But on the other side, the company became more focused and, what’s more, profitable.

Shopify stock is now focusing back on ecommerce, using whatever it has at its disposal to be the best of the best in terms of an ecommerce platform. And after a recent conference, analysts are excited about the future of this stock.

Investor Day excitement

At their recent Investor Day, the first since 2019, Shopify stock remained convinced about its growth and ability to bring in more market share in the ecommerce market. Furthermore, it put aside “myths” that the company only had so much of the addressable market to gain, emphasizing the strength of its business model, as well as the focus on small and medium-sized businesses.

Analysts were particularly positive about the company’s initiatives to drive growth in profitability, as well as scale out its business on an international level. The company remains devoted to its mid-market brands, with one analyst stating these would become the “enterprise clients of tomorrow.”

So with gross merchandise volume (GMV) up 40% year over year on mid-size businesses, and 25% on large accounts, the future looks quite positive. This kind of growth will help it keep its larger clients, and bring on more clients looking for a boost from Shopify stock.

How it’s happening

Shopify stock came away with two priorities at their Investor Day to drive long-term growth. The first is a commitment to making the best platform in the world through product innovation and business-to-business opportunities. The other is to generate profit, in order to support more of their first initiative.

It seems the company has learned from the past. Rather than try and be everything related to ecommerce, Shopify stock wants long-term growth focused on what it’s best at. It wants one system with the ability to deliver value to merchants. And that value will be directly put back into the share price.

Now granted, it’s not as though a streamlined approach will lead to easy results. The next year could see results shrink as consumers continue to try and keep cash in their pockets. This is likely why Shopify stock didn’t provide long-term targets. Even so, this company is a more focused one. And that’s something investors can certainly buy into.