Shopify (TSX:SHOP) may have endured a brutal stumble just over a month ago when it clocked in quarterly results that had investors saying “goodbye” to the stock. Indeed, those who sold, rather than bought, the dip have now missed out on a pretty swift recovery, one that may not be over just yet. Despite the recent turbulence, SHOP stock is still up huge off, by close to 42%, its 52-week lows.
The latest jolt of enthusiasm is thanks in part to an analyst over at Evercore ISI who stepped forward praising the stock with a Buy rating (the equivalent of outperform) from an “in-line” rating. Specifically, Evercore ISI believes in Shopify’s ability to recover after one of its somewhat rare stumbles.
Indeed, the e-commerce space hasn’t been 100% free from headwinds. With inflation rattling the personal budgets of many, it should be no surprise to see the industry in a rather muted state. As always, though, buying shares of Shopify after a drastic pullback can be hard to do, especially if you’re a new investor who’s just a bit shy of elevated levels of volatility.
Brace for volatility, Shopify stock investors!
With Shopify, you’re going to need to temper your emotions as the hyper-growth sensation just isn’t going to behave as a blue-chip utility would on a day-to-day basis. Indeed, Shopify is not for everyone, but those who do put in their homework, I think, stand to be rewarded greatly, especially if they can be a net buyer of shares after Mr. Market has sent the name to the penalty box.
Right now, Shopify stock looks to be ready to skate out of the penalty box. After a solid 15.5% rise in the past month, the stock is down just 13.5% from the pre-quarter plunge that ensued back in early May.
SHOP stock: Not cheap, but undervalued? Perhaps greatly
At close to 68 times forward price to earnings (P/E), Shopify is, by no means, a dirt-cheap stock. But given its still impressive growth narrative, I believe Shopify stands out as one of the intriguing tech titans that the market has forgotten about amid the rush to the white-hot generative artificial intelligence (AI) plays. Sure, e-commerce isn’t as hot as it used to be, but the industry could recover a great deal once the consumer is back.
My bet is that every rate cut delivered by the Bank of Canada will make the consumer incrementally stronger. Now that the central bank is talking cuts, not hikes, I think things are looking up for consumers and some of the more spending-centric names out there.
If rates stay flat, though, I still see a path higher for Shopify as more analysts on Wall Street enter the bullish camp. The company has a great ecosystem that actually looks quite “sticky.”
The bottom line on Shopify stock
As long as Shopify puts its merchants first, I find the company’s platform will get better over time, regardless of where the economy, rates, or industry are at any time. Shopify is a co-founder-led company, and it still has growth in mind. As such, it’s no mystery why SHOP stock is still a Buy through the eyes of many analysts right now.
