Quick, name the greatest Canadian tech company ever. Did you say BlackBerry? Many did, and why not. They basically invented the smartphone. What about Nortel, a stock that once accounted for 36 per cent of the value of the entire Toronto Stock Exchange? Another good choice, despite the way things ended.
But there’s a new contender, of course, and at least one observer thinks it is right at the top of the list.
“Shopify is probably the greatest Canadian tech success story in history, a very exciting company,” says Jamie Murray, head of research for the Murray Wealth Group.
“We've seen the share price go on a huge run,” said Murray, who spoke to BNN Bloomberg on Tuesday.
It’s impossible to avoid, really. The meteoric rise of Ottawa’s e-commerce sensation Shopify (TSX:SHOP) has been a theme of the Canadian tech landscape for years, with the discussion constantly circling around the company’s valuation.
First, the stock seemed too expensive in its sub-$100 days back in 2017, then it was too pricey in the $200 range in 2018, and, of course, all that growth in 2019 when SHOP ballooned up 184 per cent was just too much.
Well, how about another 150 per cent so far in 2020?
Murray says it’s hard to argue with Shopify being in the right place at the right time when it comes to the COVID-19 pandemic and the closure of retail outlets left and right, prompting a flood of new merchants onto Shopify’s platform.
“We bought some Shopify about two or three years ago, and even at that time, our cost base is around $170 on the Canadian ticker,” Murray said. “So, we've done very, very well and we've definitely made partial sales along the way.”
“But it's just a great innovative company,” Murray said. “It’s positioned to help merchants take on Amazon as Amazon continues to consolidate its power. And we've heard about even physical retailers who built a Shopify store during COVID and sold hundreds of thousands of dollars of merchandise that they never would have sold just through their own store.”
Shopify proved to investors that it’s a pandemic winner fairly early on, with its quarterly financials delivered in early May showing a big uptick in the number of merchants signing onto the platform, resulting in an overall 47-per-cent growth in revenue to $470.0 million. On an adjusted basis, SHOP even turned a profit at $22.3 million or $0.19 per share, with plenty of indication that growth on its platform will continue.
With growth stories like SHOP, however, volatility is the name of the game, and this stock has seen numerous pullbacks of over 20 and even 30 per cent over the past four years —meaning, investors still waiting to get in should wait for the next big drop, said Murray.
“Where the share price is today it's discounting in a lot of long term growth. We've seen it be a ten-bagger in the last four years but it’s probably not going to do that in the next four years. It’s going to be a tougher road for that on the investor side,” says Murray.
“The whole tech space, as long as it stays hot I think Shopify is going to continue to attract investor interest,” he said. “And if you don't own it, it's had many, many pullbacks. Just wait for one of those and buy half a position. And if it falls another 20 or 30 per cent, buy a little more.