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Shopify (NYSE: SHOP) stock is having an amazing run in 2023. If I bought $5,000 worth of shares in an online shopping company at the beginning of the year, my investment would now be approximately $9,200.
Here, I’m going to take a look at why e-commerce stocks are underperforming this year. I’ll also discuss whether the stock is still worth buying today.
Why Shopify Has Jumped In
There are a few reasons why Shopify’s shares have boomed this year. One is that sentiment toward technology stocks — which fell out of favor last year — has improved significantly.
Shopify isn’t the only tech stock to do well in 2023. Lots of companies, including the likes Apple And Amazonhas seen a double-digit percentage increase in its share prices.
Secondly, the company has recently increased its prices. In late January, the company said it would be hiking the monthly prices of the Basic, Shopify, and Advanced plans by more than 30%. This is a huge increase and should increase revenue.
Finally, investors really liked the company’s most recent Q1 results, which were published last week. For the quarter, Shopify posted revenue of $1.51bn, up 25% year-over-year, and ahead of analysts’ forecasts of $1.43bn.
Meanwhile, the group posted a “Wonder” profit. For the period, earnings per share came in at $0.01. Analysts were expecting -0.03.
In its first-quarter results, Shopify also told investors it would cut its workforce by 20%. This was seen as a positive development as it should improve profitability.
The company said it is selling its logistics arm to freight forwarder Flexport. This is another positive as this business could have consumed a lot of capital.
still worth buying
While Shopify has had a strong performance, I think the stock is still worth a buy today. This is a company that continues to grow at a healthy rate. This year, revenue is expected to reach $6.7 billion, up from $5.6 billion last year (a 20% increase).
And it continues to add big brands to its platform. For example, in the first quarter of 2023, it welcomed watch powerhouse Seiko, backpack maker Herschel Supply and denim-based fashion retailer 7 For All Mankind.
One thing that can help accelerate development is artificial intelligence (AI). Recently, Shopify launched a new AI shopping assistant powered by OpenAI’s ChatGPT API. It is designed to create a faster, more personalized shopping experience for consumers.
,We are at the dawn of the AI era and the new capabilities it unlocks are unprecedented. Shopify is privileged to be among the companies with the best potential to use AI to help our customers,commented CEO Tobias Lutke.
Meanwhile, the group is on the verge of making regular profits. This year, analysts expect the group to post a net profit of $316m. Next year, they forecast $609m. Regular profits should make it easier to value the company and reduce volatility in the share price.
It’s worth pointing out that Shopify is a high-risk stock. Valuations are high and the company faces a lot of competition from other e-commerce businesses. So this is not a stock on which I would go ‘all-in’.
However, I think that a small holding as part of a well-diversified portfolio can pay off in the long run.
The post If I’d bought $5k worth of Shopify stock in early 2023, that’s how much I’d be the first to appear on The Motley Fool UK now.
Ed Sheldon has positions at Amazon.com, Apple and Shopify. The Motley Fool UK recommends Amazon.com, Apple and Shopify. John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, a subsidiary of Amazon. The views expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a wide variety of insights makes us better investors.
Motley Fool UK 2023