- Shopify (SHOP) is working towards expansion of the fulfilment network.
- The recent announcement about accepting cryptocurrency as payment is a smart move.
- SHOP stock is trading at a discount and is a buy.
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E-commerce company Shopify (NYSE:SHOP) has seen massive ups and downs post-pandemic. While the company did not miss out on a chance to make the most of the pandemic, it has had a rough start to 2022. SHOP stock has plummeted more than 70% year-to-date (YTD) and is down to $324 a share. It wasn’t long ago when the stock was as high as $1,700 but the decline is heavy and disappointing.
With the reopening of physical stores, Shopify has seen a dip in revenue growth. As the stock is inching closer to the 52-week low, I think there is ample upside from here. SHOP stock is an ideal growth stock for your portfolio and it is trading at a massive discount. With that in mind, let’s dig deeper into my investment thesis on SHOP stock.
What Is Happening With SHOP Stock?
Shopify reported first-quarter results and hit $1.2 billion in revenue, up by 22% year-over-year (YOY). It is also the slowest pace of growth for the company since it went public. The company’s earnings were below estimates and it missed the earnings-per-share (EPS) as well as revenue projections. This led to a dip in the stock. Despite the disappointing earnings, the company is making big plans to expand its presence in the e-commerce sector.
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The company has mentioned that it plans to expand the fulfillment network, which could hurt its cash reserves and profitability in the short term. However, I see it as an investment that will pay off in the long run. It is also acquiring Deliverr, a fulfillment technology provider in a deal valued at $2.1 billion. This deal might not be timed well but it could pay off in the next two to three years.
Recently, the company announced that it will accept cryptocurrency payments via Crypto.com. It is a smart move that will allow customers to pay merchants in over 20 cryptos. SHOP stock was up by 11% after this announcement.
The Bottom Line
I cannot deny the fact that there are some headwinds for Shopify in the short term but if you look at the potential rewards, the stock looks like a great buy.
SHOP stock is down by more than 70% from its all-time high and this means it has a lot of space for an upside from here. If you look at the overall picture, Shopify has made a lot of progress over the past few years and the current dip in earnings and EPS could be a post-pandemic effect. As long as the company continues to expand its customer base and gross merchandise value, it has the potential to soar.
SHOP stock offers massive long-term opportunities in the ever-expanding e-commerce space. It might not hit as high as it once did but it could generate stable returns over the next year. The current dip offers a great entry point.
On the date of publication, Vandita Jadeja did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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