We recently published a list of 10 Best Economic Recovery Stocks to Buy. In this article, we are going to take a look at where Shopify Inc. Class A Subordinate Voting Shares (NASDAQ:SHOP) stands against other best economic recovery stocks to buy.
Economic cycles, as defined by economists, alternate between periods of growth, peak, recession, and recovery, depending on the stage that a country’s economy is at. In particular, the term “economic recovery” describes the period that follows a recession and is characterized by improving employment, increased business activity and investment, rising consumer confidence, and accelerating GDP growth. Recoveries usually start after governments enact fiscal and monetary policies to stimulate investment and spending – the primary stimulative instrument in the US has been the FED funds rate. When an economic recovery kicks in, the sectors that tend to outperform are the cyclical ones – consumer discretionary, industrial, financial, and technology – driven by both a recovery in the previously depressed valuations as well as by broad acceleration in growth.
Another important consideration for investors is that the stock market and the economy do not move in sync; the former tends to be a forward-looking animal, meaning that stock prices tend to rise in anticipation of an economic recovery, while the actual economic conditions may still be depressed and reflect low GDP growth, high unemployment and sluggish private spending. Consequently, the key takeaway for readers is that investments in economic recovery stocks shall be made during peak uncertainty and pain, at or near a market bottom when everyone is fearful and reluctant to buy. As the legendary Warren Buffet has put it,
“Be fearful when others are greedy and be greedy when others are fearful.”
READ ALSO: 11 Best Counter Cyclical Stocks to Buy According to Analysts.
The US economy and stock market are the most developed in the world and often reflect textbook examples of economic cycles. The previous unofficial recession in the US occurred in 2022, when the GDP growth posted 2 quarters of negative growth amid a sharp increase in interest rates to combat rising inflation. The stock market moved in sync with the economy during that year. The following year, 2023, resembled a slow recovery fueled by the emergence of the AI megatrend as well as strong public spending on infrastructure and other large projects. Calendar 2024 and early 2025 resembled an economic peak, as growth moderated and private spending became weaker. In such moments, even the slightest economic headwind and/or uncertainty can trigger a recession and a broad market meltdown. That’s exactly what happened with the new Trump 2.0 administration, which brought plenty of uncertainty related to tariffs and sharp cuts in the public sector.
While most investors are currently concerned about declining stock prices (the main US stock market benchmark is down over 11% at the time of this write-up since its February peak), the smart money is already looking for signals of a potential recovery. Atlanta Fed projects that the US economy posted negative real GDP growth in Q1 2025, estimated at -2.4%; given the uncertainty and tariff threats persisting in April as well, chances are that Q2 2025 will be in negative territory as well, which would mark an official recession. The problem is that the stock market already prices in such a scenario, which makes it difficult to exploit or hedge against. The only plausible move at the moment is to look for economic recovery stocks in an attempt to time the market bottom. We believe there are solid reasons to believe that the stock market bottomed out in early April and that things will only improve going forward.
The most important signal in favor of a potential economic recovery ahead is that Trump’s tariffs proliferate as a short-term negotiation tool only, which seems to work well in relation to most trading partners. On April 9, Trump announced a 90-day pause in new tariffs for 75 countries until negotiations to discuss potential solutions are arranged. Here’s how Kevin Breuninger, a CNBC journalist, commented the following on the recent developments:
The White House is clarifying that Trump’s announcement of a 90-day tariff “pause” means that the “tariff level will be brought down to a universal 10% tariff” during that time, while “negotiations are ongoing.” That respite does not apply to China, which will see U.S. tariffs on its goods rise to 125%.
We see this announcement as a sign that chances are high that the US will reach a positive agreement with the 75 countries mentioned. While the situation with China is still intense, things could deescalate if other countries reach agreements with the US and set the stage for China as well. In this context, if the tariffs saga is successfully navigated, the main headwind for the economy will dissipate, potentially triggering a broad economic recovery that would push stock prices higher. With that being said, we may currently be at an opportune moment to pick the best economic recovery stocks.
An enthusiastic customer completing a purchase and receiving an order confirmation via one of the companies online sales channels.
Our Methodology
We used a screener to identify stocks with at least a 20% revenue compounded annual growth rate (CAGR) in the last 5 years. Then, we selected the top 10 stocks with the largest estimated average analysts’ upside and included them in the article in ascending order. For each stock, we also include the number of hedge funds that own the stock as of Q4 2024. The stocks are ranked according to the upside potential.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Shopify Inc. Class A Subordinate Voting Shares (NASDAQ:SHOP)
Estimated average analysts’ upside: 73.08%
Revenue CAGR last 5 years: 43.27%
Number of Hedge Fund Holders: 64
Shopify Inc. Class A Subordinate Voting Shares (NASDAQ:SHOP) is a multinational e-commerce company that provides a cloud-based platform on which businesses can create and manage online stores. The platform also offers complementary services like payment processing, marketing, shipping, and customer engagement tools. The company has managed to establish an almost complete ecommerce solution for businesses of all sizes and managed to attract even such giants like Mattel and Nestle. SHOP is exposed to the e-commerce sector fundamentals, which makes the company well-positioned to benefit from increased online retail activity during economic recoveries. The Canada-based company ranked 7th on our recent list of 10 Best SaaS Stocks to Buy According to Billionaires.
Shopify (NASDAQ:SHOP) delivered exceptional results in Q4 2024, with revenue growing 31% and achieving a 22% free cash flow margin, contributing to an annual revenue growth of 26% and an 18% free cash flow margin for the year. The company’s gross merchandise value (GMV) approached $300 billion, while revenue reached $9 billion for the year, representing nearly 2.5x more GMV and 3x more revenue compared to 2020. Operating income surpassed $1 billion for the year, which was 4x higher than the previous peak of $269 million in 2021.
Shopify (NASDAQ:SHOP) has significantly strengthened its market position, achieving over 12% of the US e-commerce market share while continuing rapid growth in regions like Europe and Japan. The company’s enterprise segment showed strong momentum, with major brands like Reebok launching on the platform. International expansion remained robust, with GMV growing 33% in Q4, led by 37% growth in EMEA, while the company maintained operational discipline by managing expenses to 32% of revenues. The Shop Pay commerce component has become a compelling entry point for enterprise brands, with GMV from this component surging nearly 20x in 2024.
SHOP is one of the best economic recovery stocks to own as both analysts and hedge funds signal strong confidence in the stock – average analysts’ upside stands at a whopping 73.08%, while 64 hedge funds own the stock as of Q4 2024.
Overall, SHOP ranks 4th on our list of best economic recovery stocks to buy. While we acknowledge the potential of SHOP as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than SHOP but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and 30 Best Stocks to Buy Now According to Billionaires.
Disclosure: None. This article is originally published at Insider Monkey.