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Now that the Canadian stock market is reaching new heights, many long-term investors may find it difficult to identify stocks with solid growth potential that haven't yet skyrocketed. While the TSX compound The benchmark is up 14.3% so far in 2024, some fundamentally strong growth stocks such as buy (TSX:SHOP), are still underperforming the broader market. Despite Shopify's position as a leader in the e-commerce space, its stock performance has lagged into 2024, raising the question: Is Shopify stock still an obvious buy at current levels?
Let's take a closer look at Shopify's recent financial performance and long-term growth potential to find out if now is the right time to invest in this Canadian tech giant.
Shopify's financial growth continues to be impressive
Although Shopify stock is underperforming the market this year, that doesn't mean it's a company to overlook. In fact, the Canadian e-commerce platform provider's financial performance remains strong in 2024, indicating that its underlying business continues to thrive.
In its second quarter of 2024, Shopify posted strong year-over-year revenue growth of 21% (year-over-year) to $2 billion, driven by strong demand for its services. After adjustment for the sale of its logistics businesses, the growth rate jumps to 25% year-on-year. This impressive increase, despite current macroeconomic challenges, highlights Shopify's resilience and adaptability in a competitive market environment.
Additionally, the total value of transactions processed through Shopify's platform or its gross merchandise volume (GMV) increased 22% year-over-year to $67.2 billion. This increase in GMV indicates that more merchants are choosing Shopify to power their e-commerce businesses, even as consumer spending remains weak. Similarly, the company's payment processing solution continues to gain traction. Its gross payments volume (GPV) grew to $41.1 billion, representing approximately 61% of its total GMV. This continued adoption underscores Shopify's ability to integrate more deeply into merchants' operations, solidifying long-term relationships.
Beyond revenue growth, Shopify's profitability metrics also look strong. In the latest quarter, the Ottawa-based company's gross profit rose 25% year over year to $1 billion, while its gross margin expanded to 51.1% from 49.3% a year ago. . In addition to other favorable factors, Shopify's recent strategic decision to exit the logistics business has helped improve its profitability.
Is it still a no-brainer to buy Shopify stock today?
Despite its strong financial growth trends, SHOP stock is currently trading with a gain of less than 4% year-to-date at $107.11 per share and a market capitalization of $138 billion. However, this underperformance offers a potential buying opportunity for long-term growth investors, especially those who want to benefit from Shopify's strong fundamentals and the rapidly expanding e-commerce market.
Recently, Shopify has increased its focus on integrating artificial intelligence (AI)-based tools and services into its platform, further strengthening its value proposition for merchants. The company has been leveraging AI technology to help merchants optimize their operations, from automating customer service to offering personalized shopping experiences.
As the global shift towards online shopping continues to accelerate in the coming years, I expect Shopify's dominance in the e-commerce space to strengthen further, making it an obvious stock to buy now and hold for years.