It’s always a prudent idea to at least think about taking some gains off the table after an explosive and sudden run, especially on that you may not have seen coming. Indeed, experiencing a sudden upside surge can leave you hungry for further gains, even if a stock’s market value has surpassed your estimate of its actual worth. Undoubtedly, in such scenarios, investors had better be prepared to forego some of the recent gains back to Mr. Market if the price and valuation have surged to excessive levels.
In the case of e-commerce titan Shopify (TSX:SHOP), it’s continued to ride high following the release of some spectacular quarterly earnings results. And while the company can’t beat in a big and surprising way every quarter, I think the stock remains a tempting buy going into the new year, even if expectations and the valuation have increased in recent months.
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Shopify stock’s getting expensive going into 2025
Of course, it’d be best to wait for a market pullback before thinking about buying more aggressively. However, I’m not so sure we’ll get one as investors continue bidding up their favourite high-multiple growth stocks on the back of Trump’s return, lower interest rates that loom, and, of course, generative artificial intelligence’s (AI’s) continued advance.
Recently, the company ramped up its ad spending to beckon more customers. Indeed, such a move could have a dramatic effect as we enter the high-spend holiday season.
Indeed, tariff worries could cause some Canadians to put their wallets away. But for the most part, it’s hard not to feel good about the environment ahead as the TSX Index roars higher and consumers ready themselves lower interest rates on both sides of the border.
Making all the right moves
It’s not just spending on ads that could power Shopify to more significant growth. The company has been making some brilliant partnerships that could bring its exposure to another level.
Whether discussing featuring products on the AI search platform Perplexity AI (a smart move I’ve outlined previously) or efforts to entice bigger businesses to use its enterprise offering, there’s so much room for growth. And, of course, there are the Shopify Magic AI tools that could be made that much better over time.
As to whether customers will pay more for such AI tools remains to be seen. If they help drive sales or save costs, such a value-added service may pay for themselves over time. In any case, I think there are plenty of reasons to stick by Shopify as its rally goes into overdrive and its valuation starts becoming elevated again.
The bottom line
I’d look to use a dollar-cost averaging (DCA) approach with the name given its history of extreme volatility (2.36 beta entails higher market risk). If the stock drops by double-digits (there’s a very high chance of this going into 2025), investors should be ready to buy the dip. In short, SHOP stock is still a buy at over $164 per share. Just be ready to average down your cost basis should a plunge be in the near future.
