It might be time to buy this growth stock on sale
Jamie Louko (Shopify): The e-commerce industry has faced the full brunt of the uncertain economy and high inflation. With consumers worried about rising prices and what the future holds for their finances, they have been dramatically cutting back on their number of discretionary purchases.
And there’s no doubt that Shopify has been feeling the pain. Revenue growth has fallen notably over the past few years, with Q3 2022 revenue growth of just 22% on a year-over-year basis, reaching $1.4 billion. Comparatively, Shopify was growing its top line above 90% year over year in each quarter in the back half of 2020. Naturally, this has resulted in a plummeting stock price. In 2022, Shopify’s share price got cut by 75%.
Yet, Shopify’s adoption is still trending higher compared to the broader e-commerce space. Etsy (ETSY -2.10%), for example, saw its Q3 2022 top line increase just 12% compared to the year-ago period. Shopify is even outpacing stalwarts like Amazon (AMZN -1.45%), whose online stores revenue rose just 7.8% in Q3 2022 to $53.85 billion.
Despite Shopify’s far faster growth compared to peers -- which will likely result in market share gains -- the company’s valuation is now trading near record lows. The e-commerce stock is currently valued at 11.6 times sales, which is close to its lowest valuation since 2016 (excluding late 2022).
Cathie Wood’s ARK Invest has been selling some of its shares of Shopify in 2023, but ARK’s conviction remains high considering the company is still ARK’s seventh largest position across all of its ETFs. At its cheapest valuation in years, now might be the time to buy a few shares of this Cathie Wood favorite.
