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Shopify is a good bet, this portfolio manager says


It’s been a while now since anyone’s been talking about Shopify (Shopify Stock Quote, Charts, News, Analysts, Financials TSX:SHOP) as the darling of Canadian tech stocks, let alone the market in general, where SHOP was once the most valuable company by market cap on the TSX. But with shares recouping ground over the past few months, investors should be thinking about Shopify in the current climate. That’s the skinny from portfolio manager Kim Bolton, who still has faith in a rebound.

“We actually own it. We lightened up a little bit back around March, April of last year, but we’ve continued to hold it at less than one per cent [of our portfolio],” said Bolton, president of Black Swan Dexteritas, who spoke on BNN Bloomberg on Tuesday.

“We like the company and we like the management. There are a lot of moving parts going on within Shopify, especially in their ongoing negotiations with Amazon’s Buy with Prime. They’re talking about whether they would actually partner on that side,” he said.

An early winner in the pandemic era, Shopify’s stack of merchants grew at a huge rate, as everyone and their dog put their business online during the stay-at-home days of 2020 and 2021. But a general market turn away from growth and tech stocks started to take root in late 2021, with SHOP seemingly a prime target. The stock shed an incredible 80 per cent of its value in the span of about six months and has only managed a modest rebound since about October. SHOP is still down about 75 per cent from its November 2021 highs.

Analysts are clearly circumspect on the company’s prospects, with an average 12-month target price of about US$37 per share, as that’s just about where the stock’s been trading in recent weeks.

But Bolton thinks there are reasons to be optimistic, as the company appears to be more focused on profitability, something on which the market has been particularly focused these days.

“There are some concerns out there — what’s going to happen with them as they go into possibly a recession. But they have a new CFO, Jeff Hofmeister, and he has put it down as a mandate that he wants to get a path to profitability. So, it will be an interesting time and we still like this,” Bolton said.

“You can see that people are a little worried about how these tech stocks have recovered, and Shopify has recovered an awful lot in the last couple of months,” he said.

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