Should You Buy Shopify Stock Ahead of Earnings?

Shopify (TSX:SHOP)(NYSE:SHOP) reports its fourth-quarter earnings this week and it could be another blowout performance for the company. Sales have been on the rise since the pandemic started with shoppers doing more buying online rather than in-store shopping due to lockdowns and other restrictions.

In the third quarter, the company’s sales topped US$767.4 million – which was just shy of double what it generated in the prior-year period. Previously, the company’s growth rate was at less than 50% and starting to slow down. But the pandemic has changed that and it has given the business another gear. Shopify’s subscription revenue grew by 48% in Q3 as there was an influx of merchants signing up to use the service.

And with many people still out of work due to the pandemic and looking for ways to make money, it’s possible that these trends will continue.

Currently, Shopify is trading at around $1,850 on the TSX and another strong performance could easily send it to new all-time highs, above the $2,000 mark. There’s no doubt that the stock is an expensive buy, trading at 67 times its sales but investors are willing to continue to pay a big premium for this top growth stock and that’s not likely to change now.

For those reasons, I’d expect to see Shopify continue to rise in value. It may not be a suitable long-term investment as its high price point could make the stock due for a correction at some point. But if you’re willing to keep a close eye on it, the stock could net you a decent return.

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