Canadian e-commerce company Shopify (Shopify Stock Quote, Chart: TSX, NYSE:SHOP) has been battered by the overarching tech selloff, now down 18 per cent since the start of October, but investors shouldn’t think about jumping in just yet. The stock is still too expensive, says Colin Stewart, CEO and Portfolio Manager at JC Clark.
Tech stocks continued to get pummeled this week on worries over trade tariffs with China and a general mood of unease concerning the once high-performing FAANG stocks, including names like Amazon, Apple and Facebook, all of which have seen double-digit declines in recent weeks.
And while Shopify’s online platform and services aren’t likely to be significantly affected by furthering trade disputes, the stock has been roped in with the rest of the tech selloff, on Monday closing down 11.4 per cent. Still, Shopify is up 38 per cent for the year so far, with the stock proving resilient over the past 12 months to a number of short-selling attacks which caused only temporary setbacks to its rising share price.
That upward momentum may look good on the charts but the stock already has much of its future earnings baked into the price, says Stewart.
“Nothing against Shopify, a homegrown Canadian company, it’s just a very expensive stock and we think there’s a lot of good news priced into it,” says Stewart, in conversation with BNN Bloomberg.
Instead, for an e-commerce play, companies like Visa and Mastercard are now being hailed as the safer bet. Stewart says that as consumers continue to increase their use of digital payment, the credit card companies will prosper.
“Visa is great recurring revenue business and a global franchise,” says Stewart. “Everything we do every day, we use less and less cash. We pay with our phones, with our credit cards and it all goes back to Visa and Mastercard.”
Visa is currently up over 16 per cent year-to-date while Mastercard is up over 22 per cent. Well-known investment lodestar, Berkshire Hathaway, which owns stakes in Mastercard, Visa and American Express , recently made headlines with a US$600-million investment in two early-stage fintech companies, Paytm and StoneCo. “Payments are a huge deal worldwide,” said Berkshire CEO Warren Buffett, to CNBC. “And you’ve got all kinds of smart people working at various ways to change the payment arrangements.”