Ever dreamt of discovering that one great stock that could turn you into a millionaire? Well, there’s one on the Toronto Stock Exchange, already hailed as a “millionaire-maker,” that just became even more attractive. Yes, I’m talking about Shopify (TSX:SHOP), the Ottawa-headquartered e-commerce platform provider that continues to transform online retail for entrepreneurs and businesses worldwide.
As Shopify’s stock has yielded some eyepopping returns since its initial public offering in 2015, some investors might wonder if they have missed the boat or if the stock is too expensive to buy now. However, I believe that Shopify still has plenty of room to surge further. Moreover, the recent declines in SHOP stock after its latest earnings report make it even more attractive, which I find undervalued at current levels.
Before I explain why Shopify could be a great growth stock to buy today, let’s take a quick look at some important highlights from its latest earnings report released on May 8.
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Key highlights from Shopify’s first-quarter earnings report
In the quarter ended in March 2024, Shopify’s total revenue jumped 23% YoY (year over year) to US$1.9 billion. If we adjust this growth for the company’s recent sale of its logistics operations, this revenue growth rate climbs further to an impressive 29% YoY. These solid sales figures reflect Shopify’s expertise in navigating market dynamics despite the ongoing macroeconomic uncertainties and high inflation.
The Canadian company registered a solid 23% YoY increase in its gross merchandise volume (GMV) last quarter to US$60.9 billion. In general, stronger GMV highlights the increasing volume of commerce being processed through Shopify’s platforms, which is clearly a reflection of strong merchant and consumer engagement. Overall, its first-quarter revenue from merchant solutions and subscription solutions inched up by 20% and 34%, respectively.
With the help of these strong topline numbers, Shopify posted adjusted quarterly earnings of US$0.20 per share. These earnings not only showed significant improvement over its adjusted earnings of just US$0.01 per share in the same quarter of the previous year but also exceeded Street analysts’ expectations of US$0.17 per share.
Why Shopify stock looks more attractive to buy now
Despite reporting solid first-quarter financial results, which also exceeded Street’s estimates, the TSX-listed Shopify stock tanked by 18.5% on May 8, the day it released the earnings report. Since that day, SHOP stock has, in total, lost more than 25% of its value to currently trade at $79.19 per share with a market cap of $101.9 billion, which makes it look undervalued based on its long-term growth potential in my opinion.
Looking forward, Shopify expects to maintain this positive momentum, with its latest forecasts suggesting high-teen revenue growth in the second quarter. The slight expected decrease in gross margin for the June quarter could be offset by the continued discipline in operating expenses and its commitment to maintaining a robust free cash flow margin.
While its latest earnings event might have disappointed some investors, Shopify’s long-term growth outlook still looks highly promising, with its continued strategic focus on enhancing its platform capabilities and expanding its global merchant base. In addition, the company’s strong financial position gives it the flexibility to make some quality acquisitions and invest in technology, which could accelerate its financial growth further. Given these positive factors, the recent sharp dip in SHOP stock could be an opportunity for long-term investors to buy this millionaire-maker growth stock at a bargain.
