Shopify (NYSE: SHOP) stock is having an amazing run in 2023. If I’d bought $5,000 worth of shares in the online shopping company at the start of the year, my investment would now be worth about $9,200.
Here, I’m going to look at why the e-commerce stock is outperforming this year. I’ll also discuss whether the stock is still worth buying today.
Why Shopify has jumped
There are a few reasons Shopify shares have jumped this year. One is that sentiment towards technology shares – which were out of favour last year – has improved significantly.
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Shopify isn’t the only tech stock to do well in 2023. A lot of companies, including the likes of Apple and Amazon, have seen their share prices rise by double-digit percentages.
Another is that the company recently hiked its prices. In late January, the company said it would raise the monthly prices of Basic, Shopify, and Advanced plans by over 30%. That’s a sizeable increase and should propel revenues higher.
Finally, investors really liked the company’s recent Q1 results, which were published last week. For the quarter, Shopify posted revenue of $1.51bn, up 25% year on year, and ahead of analysts’ forecast of $1.43bn.
Meanwhile, the group posted a “surprise” profit. For the period, earnings per share came in at $0.01. Analysts had been expecting -$0.03.
In the first-quarter results, Shopify also told investors that it would cut 20% of its workforce. This was seen as a positive development as it should improve profitability.
The company added it was 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 run, I think the stock is still worth buying today. This is a company that continues to grow at a healthy rate. This year, revenue is expected to hit $6.7bn, up from $5.6bn last year (20% growth).
And it continues to add big brands to its platform. In the first quarter of 2023, for example, it welcomed watch powerhouse Seiko, backpack maker Herschel Supply, and denim-based fashion retailer 7 for All Mankind.
One thing that could help drive growth is artificial intelligence (AI). Recently, Shopify launched a new AI shopping assistant powered by OpenAI’s ChatGPT API. This is designed to create a faster, more personalised shopping experience for consumers.
“We are at the dawn of the AI era and the new capabilities that are unlocked by that are unprecedented. Shopify has the privilege of being amongst the companies with the best chances of using AI to help our customers,” commented CEO Tobias Lütke.
Meanwhile, the group looks to be on the cusp of generating regular profits. This year, analysts expect the group to post a net profit of $316m. Next year, they forecast $609m. Regular profits should make the company easier to value and lead to less share price volatility.
It’s worth pointing out that Shopify is a higher-risk stock. The valuation is lofty and the company faces plenty of competition from other e-commerce businesses. So it’s not a stock I’d go ‘all-in’ on.
However, I think a small holding, as part of a well-diversified portfolio, could pay off in the long run.
