Should Shopify Inc. Investors Shop Elsewhere this Christmas?
Shopify Inc. (TSX:SHOP)(NYSE:SHOP) remains one of the few great Canadian tech companies to take the world by storm in recent years, climbing to astronomical valuations this year as investors have piled into companies which are believed to have the best prospects of becoming the “next Amazon.com, Inc. (NASDAQ:AMZN).”
In the e-commerce sector, growth in the small to medium-sized business (SMB) segment has driven a number of companies operating in Shopify’s niche substantially higher. Year to date, shares of Shopify have approximately doubled since the beginning of the year, marking a truly unbelievable run which has begun to lose steam of late.
Whether the selloff of nearly 20% is due to investor lethargy, a host of other high-growth options available in the cryptocurrency and cannabis space for investors to speculate on, or a reversion to the mean trade for investors betting that the company will return to a normalized level closer to the company’s long-term fundamental trajectory, Shopify remains one of the premier growth plays investors have continued to rely on to propel their portfolio’s returns higher.
As Shopify has continued to climb, I have cautioned investors about the fundamental realities of Shopify’s valuation multiple today, and the fact that what skyrockets up (sometimes) comes down hard. That said, the fact that Shopify has stabilized around a new level in the $120-$130 range suggests the company may be headed for a more muted landing, or perhaps a continued climb, depending on investor sentiment and the willingness of the market to accept a higher risk premium in exchange for greater growth prospects over the medium term.
Invest wisely, my friends.