Year-to-date, shares of Shopify Inc. (TSX:SHOP)(NYSE:SHOP) have been on an amazing run, with shares more than doubling before retreating more than 6% on Tuesday. With very few catalysts taking Shopify’s stock lower since the company’s initial public offering, it appears that the technology company’s stock price has finally begun to test a new ceiling, with investors potentially taking some money off the table following this impressive valuation bump. The question remains: is this dip symptomatic of a more widespread slide, or is this a periodic dip which investors should look to as a buying opportunity at current levels?
Shopify represents one of a handful of growth gems currently trading on the TSX, enticing investors to accept higher valuations based on increasingly rosy growth prospects for a company with no debt and the ability to continue growing at an incredible pace debt-free. Shopify is poised to take advantage of the e-commerce wave taking hold of the financial markets of late, and has used the company’s corresponding rapidly increasing stock price as a virtual ATM to fuel growth, with secondary public offerings providing the company with an impressive amount of growth capital to invest in the pursuit of market share and future profits.
Shopify is certainly a long-term play, and any investor considering adding SHOP to their portfolio at current levels (even after the minor pullback) will need to be wary of the company’s elevated valuation relative to most other technology stocks, and be ready to buy more stock on any additional dips. For investors looking for a short-term bump, however, I would steer clear.
