Shopify has made a transformative deal with OpenAI: is the stock a buy?

Shares of Shopify (TSX:SHOP) have had some pretty steep ups and downs over the past few weeks, to say the least. And while high volatility is a given when it comes to the e-commerce tech company, which has a high beta of 2.8 (which has a higher correlation to the broad market), I still think the choppy moves are worth riding out if you believe in management and the long-term AI-driven growth story at hand.

As Shopify stock sails past Black Friday and into quite a tough spot, seemingly halfway between the low of November’s correction and the 52-week high, investors have to wonder what the path forward will be as some growth investors become a little more cautious when it comes to the AI ​​business. Perhaps AI stories are no longer enough to drive the stock prices of AI innovators much higher in the medium term.

Either way, I think long-term investors have time to wait for AI to move beyond talking. While things are moving in the right direction, especially in the case of companies that are actively applying AI to improve various aspects of the business (think Shopify), I think there is tremendous long-term value to be gained for those willing to brave the AI-induced dips. It won’t be easy, though, especially when you keep hearing the term “bubble” thrown around ad nauseam. Regardless, I think Shopify stands out as a potential AI value play for the new year.

Don’t forget the potential for AI-driven sales!

Now that a smart deal has been struck with OpenAI, which was announced just a few months ago, I think investors are forgetting the technology’s potential impact on Shopify’s growth profile. Of course, OpenAI hasn’t been a source of bullishness lately.

Investors have undoubtedly become quite bearish on the name, likely because ChatGPT is at risk of falling behind. Regardless, OpenAI has its fair share of issues, which, in my opinion, won’t burden Shopify. Ultimately, Shopify can work with virtually any AI, especially as models become more common and AI benchmarks change over time. In an earlier piece, I highlighted the OpenAI deal as a low-risk opportunity that could come with high rewards. I haven’t changed my tune since announcing the exciting collab.

Since Shopify appears to be allowing products to be sold directly through ChatGPT, I think potential merchant revenue could be significantly higher in the coming year, especially as chatbot shopping becomes more of a thing. I think this is the start of an upward trend. Even if it doesn’t become the new way people shop, Shopify may not have much to lose after all, as it allows merchants to sell on its incredible platforms, which are getting better and easier to build as new AI tools emerge.

In short

While it may take some time for AI sales to take off, I think long-term investors have plenty of incentive to be patient, especially as we hear less about Shopify’s long-term AI potential. As of this writing, SHOP shares are a bit on the pricey side, with a price-to-earnings ratio of more than 117 times the price-to-earnings ratio. However, I think the 11% discount to 52-week highs is worth pursuing as long as you’re willing to not be scared out of the name by the next volatility spike.