Is now the right time to buy Shopify?

Is Shopify (Shopify Stock Quote, Chart, News TSX:SHOP) a buy here?

Certainly, the e-commerce sensation has had a run for the ages over the past 12 months and with the business firing on all cylinders prospects should be good that SHOP will soon get back to its winning ways.

That’s possible, says fund manager Gavin Graham, but you’ll likely find a better entry point further into the year.

Shopify finished 2019 up an incredible 173 per cent and continued to defy all nay-sayers in early 2020 where it shot up a further 40 per cent between January 1 and mid-February.

The stock has pulled back like the rest of the market over the past while, but Graham says SHOP has been so hot there’s bound to be a significant cooling off down the road —and then there’s the overall economic fallout from the coronavirus to consider.

“It’s of course the Canadian tech success story. It proves that we can do it here and look at that share price,” said Graham of The Income Investor Newsletter, who appeared on BNN Bloomberg Wednesday. “But now is probably not a good time to be [buying] because you are likely to have a slowdown in commerce, if only because of the difficulty in moving stuff around and getting stuff on a timely basis.”

“Also, people are somewhat nervous about very highly rated companies. I don't know what Shopify is selling at in terms of P/E ratio and the rest but the fact is that it’s done so exceptionally well that now is probably not the best time to be [buying it],” Graham added.

“Keep an eye on it and in six months time, it might well be somewhat more reasonably valued,” says Graham.

Shopify made headlines last week when it announced it was cancelling its annual Shopify Unite conference to be held in Toronto in May, out of concern related to the COVID-19 outbreak. The conference, which usually attracts thousands, has been the site for significant announcements from the company such as last year’s Unite from which Shopify launched it fulfillment network.

“Due to the evolving public health concerns around COVID-19, we’ve made a hard but necessary decision to cancel the in-person element of #ShopifyUnite this year. More details to come,” the company said.

Shopify wowed with its latest quarterly earnings delivered in early February which featured a 47 per cent uptick in revenue and better net income of $50.0 million for its fourth quarter or $0.43 per share compared to $0.27 per share a year earlier.

Management has been a little more circumspect about the company’s growth prospects in 2020, saying in the Q4 commentary that revenue growth this year will be about 36 per cent.

“Q4 was just a spectacular quarter. Every part of the business was contributing. We had strong merchant growth,” Shapiro said on the quarterly earnings call. “That’s not going to be something that we expect can happen every quarter.”