Shares of Shopify (TSX:SHOP) have been on an exceptional recovery run over the past year, most recently spiking upward following the release of some pretty incredible quarterly earnings results. Indeed, the stock has had a great run, soaring more than 47% year to date.
But with a valuation that’s beginning to get somewhat stretched, investors still holding onto the name may be wondering if it’s time to take profits off the table, hang on before the next leg higher, or add to a position on the slight 10% correction off its 52-week highs.
Of course, the 10% pullback doesn’t look all too noticeable, at least compared to that sudden post-earnings spike. In any case, I believe the third quarter is worth getting behind. And as a bigger chunk of the November gains are given back, perhaps dip-buyers who didn’t buy the name ahead of the number are getting another chance to punch their ticket to Canada’s leading artificial intelligence (AI)-driven tech titan.
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AI could be a huge catalyst for Shopify over the long haul
Indeed, Shopify isn’t just an e-commerce darling that stands to benefit from the return of online shopping (that’ll come once consumer sentiment bounces back in due time), but it’s also an underrated innovator on the front of generative AI. Recently, Perplexity AI, an up-and-coming player in AI-leveraging search, unveiled a new tool named “Buy with Pro” that would allow its subscribed users to buy products, some of which are from Shopify storefronts.
Indeed, Perplexity is often touted as a disruptive force in the realm of search. Though I have no idea if the new “Buy with Pro” feature will be a hit, I think that it could pave the way for other AI offerings to start serving up products from (Shopify) stores across the web.
I think AI search’s impact on Shopify sales could be a big deal, perhaps a bigger deal than investors think.
In any case, Shopify stands to benefit from the rise of AI on multiple fronts. Whether we’re talking about ranking higher in AI searches for products or augmenting merchants with cutting-edge, time-saving AI tools, I think it’s about time we start viewing Shopify as an AI software company, one that may have more than a puncher’s chance of seeing new highs again.
The bottom line on SHOP stock
After the latest melt-up, SHOP shares are now down just 32% from its 2021 peak. If Shopify keeps making smart moves, I think it’s just a matter of time before a full recovery from the devastating 2021-22 crash is in the books.
As such, I wouldn’t be so quick to sell out of a position in Shopify, especially if you purchased after the crash of 2021-22. With so many tailwinds and a still-modest valuation (72.5 times forward price-to-earnings) relative to its growth rate, perhaps SHOP stock is a hold right here and a buy on further weakness, which may be in the cards between now and year’s end. Either way, don’t bet against the name, as it rockets higher.
