The 1 Tech Stock I’d Buy Over Shopify Today

From time to time, tech stocks gather momentum, and Shopify (TSX:SHOP) stock stands to gain. Just two months ago, the stock jumped 36% after its first-quarter earnings were released. Usually, the first quarter is a weak time for the e-commerce company. While its earnings were slightly higher than its guidance, the 36% jump came as Shopify used the magic word AI, or artificial intelligence.

Shopify stock sets the sail for AI

Shopify launches OpenAI’s ChatGPT API-powered AI shopping assistant. You tell the assistant what you’re looking for, and it provides relevant product recommendations from Shopify merchants. The purpose of a shopping assistant is to improve the customer experience and attract more consumers to the platform. The mention of ChatGPT certainly got investors’ hopes up and pushed the stock up.

Shopify also discusses various offerings such as Shopify Audiences and Commerce Components. With all these products, Shopify wants to hook users, sell offers and increase average revenue per user (ARPU). Its attach rate (an increase in the number of offers used by a user) increased by 25 basis points to 3.04%. And let’s not forget the 25% revenue growth.

But are these fundamentals attractive enough to boost the price of an already inflated stock by 35%? The macro-environment looks bleak for the 2023 holiday season as rising interest rates, inflation, and high credit may affect consumer spending.

Shopify’s 25% revenue growth represents a slowdown in the average growth rate of 50-65%. If Shopify needs to justify its $111.6 billion valuation, it will need to grow its sales 14 times over the long term, which is hard to see right now.

Buy this stock now?

While Shopify is a good stock with growing revenue and market share, it is overvalued. It has doubled since its December 2022 low. With recession fears looming and economic weakness, I’d suggest staying away from a stock that relies heavily on consumer spending. and a strong economy for its growth.

Shopify offloaded its logistics arm and fired 1,000 people to keep its costs in line with its growth. If you own Shopify stock, now is a good time to sell and buy a stock that has a diverse customer base and plenty of secular trends outside of e-commerce to tap into.

A tech stock I buy on Shopify

Instead of a losing company, I would put my money in a profitable company like Nuvei (TSX:NVEI), which has more than one growth driver. Nuvei is a payment platform company that derives more than 80% of its revenue from e-commerce transactions. Although it has diversified into digital products and financial services, they account for a small portion of its revenue due to lower transaction volumes.

This week, Nuvei stock made a vertical move of 14% after falling 37% between May and June. The stock fell as Nuvei, once again, became the target of short-seller Spruce Point Capital, which questioned the platform’s exposure to bankrupt crypto exchange FTX. But now the short-seller has confirmed that it has completely abandoned its position in Nuvei.

This sets the course for the stock to ride the growth wave as its acquisition of Paya wins clients that are not e-commerce businesses. Nuvei has become the payment partner of mobility solutions provider inDrive for its driver payments in Latin America. Paya allows Nuvei to integrate its platform with the enterprise resource planning software of large companies and provide seamless payments to the world.

Businesses bring higher transaction volumes and diversification beyond e-commerce, opening new growth paths for Nuvei. The company also made a profit, except for a one-time acquisition charge, which is why it reported a net loss in the first quarter. The stock could see a 20-30% jump in the short term.