Is it too late to buy Shopify stock?

Written by Chris MacDonald of The Motley Fool Canada

One of the largest investors on the e-commerce exchange continues to focus on transactions on the TSX exchange Shopify (TSX:STORE). The company has seen incredible volatility in recent years and remains more than 50% below its post-pandemic highs. The recent decline in Shopify’s stock price also signaled that it may be gaining bearish momentum again. As such, it shouldn’t be a surprise that there may not be as much fear of missing out on Shopify as there was for much of the last year.

Of course, this is a company whose share chart has been moving mostly up and to the right since the middle of last year. Let’s take a look at whether this momentum can be maintained and whether it is really too late to invest in this e-commerce giant.

The tailwinds are in favor of Shopify stocks

Shopify’s overall business model is one that I believe could benefit from a number of beneficial changes over time. By generating fees from transactions taking place in the Shopify ecosystem, the company benefits from overall growth in the e-commerce sector. So for those who are bullish on this space, this is an easy-to-grasp investment thesis.

However, I believe investors are starting to pay attention to other key catalysts. The company’s global expansion efforts are gaining momentum, and there are still many markets to enter. The company’s overall global e-commerce penetration rate is around 0.5%, which means a much larger share of the pie is available, especially as more and more companies around the world move to online retail.

The company’s stock prices reflect optimism (sometimes pessimism) about its growth efforts. Ultimately, Shopify will be the one to determine whether the market is too optimistic about its prospects globally.

Is now a good time to buy these shares?

Timing the market is generally a fool’s game, and you are usually better off simply investing in dollar-cost average positions over the long term. If you believe a particular company in a given sector will continue to outperform, investing over a period of time could result in a return in a stock like Shopify. Putting the same amount into these stocks every month over the last five years would have yielded profits (despite the big decline from 2022).

The story continues

Shopify’s revenue growth rate of approximately 26% and strong financial results indicate that it is a company increasingly focused on profitability. For those who are bullish on this trend, I think buying at current levels makes a lot of sense. Indeed, Shopify’s recent stock decline suggests there may be more upside than many realize.

In my opinion, we may find ourselves in difficult waters in the coming quarters. The yield curve has been inverted forever, and when it inverts, it will likely lead to confusion in some part of the market, which will likely be passed on to the consumer. However, for those with a long enough investing time horizon, I believe that dollar-cost averaging for such stocks will pay off in five or ten years.

The post Is It Too Late to Buy Shopify Stock? appeared first on The Motley Fool Canada.

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Fool Contributor Chris MacDonald has no position in any of the companies mentioned. The Motley Fool covers and recommends Shopify. The Motley Fool has a disclosure policy.

2024