Despite recent big ups and downs, Shopify (TSX:SHOP) continues to be one of the most popular growth stocks in the Canadian stock market, as it continues to be on the watchlist of most long-term investors, especially those who are bullish on the future of e-commerce. After crashing by 73% in 2022, the TSX-listed SHOP stock staged an impressive recovery in 2023, climbing by 119% during the year to $103.16 per share.
However, it has so far failed to reclaim its all-time highs above the $200 level (split adjusted), which it touched in late 2021. With Shopify stock currently hovering at $94.90 per share, with a market cap of $122.3 billion, down 8% in 2024, the big question is: could it break through the $200 barrier once again in the years to come? Let’s take a quick look at some key fundamental factors that could influence Shopify’s potential to surpass this important mark in the future.
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What drove Shopify stock above $200 in 2021
After the COVID-19 pandemic gave a strong push to e-commerce and digital payments in early 2020, Shopify saw an unprecedented surge in new merchant sign-ups and increased online consumer spending. This was one of the key reasons the Ottawa-based e-commerce provider’s sales jumped by 86% YoY (year over year) that year to $2.9 billion.
As Shopify continued taking advantage of this positive sales trend by focusing on strategic partnerships, its revenue grew by another 57% YoY in 2021 to $4.6 million. These factors boosted investors’ confidence, which helped SHOP stock reach an all-time high of $213.98 per share on a split-adjusted closing basis on November 19, 2021.
But the Shopify growth story isn’t over yet
After the global pandemic-driven e-commerce momentum gradually normalized post-2021, Shopify faced the challenge of maintaining this hyper-financial growth trajectory. This challenge, coupled with macroeconomic concerns-driven tech sector meltdown, which mainly affected high-flying growth stocks, led to big declines in Shopify stock in 2022.
Nevertheless, we shouldn’t forget that Shopify’s growth story is far from over as it continues to invest heavily in expanding its e-commerce infrastructure, including international expansion and enhancements to its platform to cater to larger businesses and diversify its merchant base.
In 2023, Shopify reported total sales of $ 7.1 billion, reflecting a 53% increase over its 2021 sales figures. Similarly, its adjusted annual earnings for 2023 stood roughly 14% higher than its 2021 earnings. Despite that, Shopify stock currently trades 56% lower than its record highs, making it look highly undervalued based on its long-term growth outlook.
Could SHOP stock surpass $200 soon?
Overall, its improving operational efficiency with international expansion, solid merchant growth, and innovations in payment processing brighten its long-term growth prospects further, which could drive a sharp recovery in SHOP stock in the coming years, possibly pushing it back above the $200 mark.
In addition, easing macroeconomic pressures due mainly to easing inflationary pressures and recent cuts in interest rates could create a more favourable economic environment for e-commerce growth, supporting this expected rally in SHOP stock in the years to come.
