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Could Shopify Stock Be a Big Winner in 2023?

Shopping and e-commerce

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Shopify (TSX:SHOP) stock has gained about 45% in three months. Moreover, in 2023, it has appreciated by over 25%. While the uncertain economic environment continues to pose challenges, SHOP stock will likely benefit from the traction in management initiatives to accelerate long-term sales growth and improve year-over-year comparisons. 

Against this background, let’s look at factors that could fuel recovery in Shopify stock. 

Multiple growth catalysts

SHOP was among those top Canadian stocks that eroded its shareholders’ wealth in 2022. Shares of Shopify fell over 73% in 2022, reversing all of its COVID-19 pandemic-led gains. The significant correction in Shopify reflects the normalization of e-commerce trends, valuation concerns, and macro headwinds. 

While the macro headwinds persist, easing inflation could slow the pace of interest rate hikes, boosting technology stocks, including Shopify. Moreover, any improvement in the economy could give a significant boost to Shopify stock. 

As e-commerce penetration as a percentage of total retail sales rises, Shopify, the enabler of omnichannel commerce, is poised to gain from the structural shift in selling models. Further, Shopify’s suite of innovative products, continued investments in retail POS (point-of-sale) offerings, and merchant solutions augur well for future growth. 

Notably, Shopify processed $25 billion of GMV (gross merchandise volume) on Shopify Payments in Q3 (third quarter), up 23% year over year. This also represents 54% of the GMV processed in the quarter through Shopify Payments compared to 49% in the prior-year quarter, implying a higher adoption of its payment offerings. 

Shopify is also witnessing outsized growth in its offline POS offerings. In Q3, its offline GMV growth increased by 35% year over year. As more businesses modernize their POS systems, Shopify will likely benefit from the higher adoption of its offline retail POS offerings. 

Further, Shopify’s continued investments in fulfillment and the addition of Deliverr will likely lead to higher customer conversions and support its growth. Also, its expansion of marketing and sales channels through partnerships with leading internet and social media companies is creating strong GMV growth. The e-commerce site is likely to bring more merchants to its platform. 

Overall, Shopify is well-positioned to capitalize on the transition toward multichannel selling models and deliver strong growth.

Another reason to invest in Shopify stock

The significant decline in Shopify stock from the peak has led to compression in its valuation. Notably, shares of Shopify are trading at a multi-year low. SHOP is trading at a next 12-month enterprise value-to-sales multiple of 8.4, which is one-third of the pre-pandemic levels and reflects a massive discount. 

Bottom Line

The ongoing shift toward omnichannel selling models and Shopify’s strong competitive positioning bode well for growth. The e-commerce platform is also expected to benefit from higher GMV penetration of its Payments, Capital, and Markets offerings. Meanwhile, increasing contributions from partners and Deliverr are positives.

Shopify faces easier year-over-year comparisons in 2023, which will support its growth. Furthermore, this large-cap TSX stock is trading cheap, providing an opportunity to invest near the current levels. 

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