The Canadian equity market has enjoyed a strong run in recent months, driven by gains in energy, materials, artificial intelligence (AI), and space-related companies. Many of the market’s top-performing stocks are now trading near all-time highs, making it increasingly difficult for investors to find attractive bargains.
That said, opportunities remain, as several fundamentally strong TSX stocks have pulled back despite maintaining solid business performance and long-term growth prospects. For patient investors, these temporary declines can present an attractive entry point.
History has shown that buying quality stocks during periods of weakness can be rewarding. When a company’s underlying fundamentals remain intact, short-term market volatility often creates opportunities to purchase shares at more reasonable valuations. As investor sentiment improves and business momentum returns, these stocks can recover and deliver strong long-term returns.
Against this background, here is a top TSX stock to buy before it recovers.
The best TSX stock to buy now before it recovers
Shopify (TSX:SHOP) is one of the best TSX stocks to buy now before it recovers. The Canadian technology giant is down over 29% year-to-date and trading significantly below its 52-week high.
Multiple factors have weighed on SHOP stock. Its high valuation has remained a drag. Meanwhile, the rapid rise of AI has sparked broader questions about how software companies will maintain their competitive advantages and profit margins in the years ahead.
Those concerns intensified following Shopify’s latest earnings release. While the company delivered another quarter of strong growth, the market focused on management’s outlook for the second quarter, which suggested revenue expansion could slow from the exceptionally strong pace seen over the past year.
Notably, Shopify’s top line surged 34% year over year in Q1. The solid revenue growth was driven by strong momentum in gross merchandise volume (GMV), with continued strength across its merchant ecosystem across regions, industries, and sales channels.
However, management projected revenue growth in the high-20% range for the second quarter. Although that forecast remains solid, it represents a slowdown in the growth rate from the first quarter.
At the same time, Shopify continues to invest aggressively in AI capabilities and international expansion, which could temporarily weigh on profitability.
Nonetheless, its core business continues to expand, and the stock is expected to recover swiftly. Moreover, its planned investments are likely to strengthen the company’s competitive position and support long-term growth.
Factors to support Shopify stock’s recovery
While Shopify stock has declined, it has multiple catalysts supporting a recovery in its share price. Shopify’s first-quarter results showed strong GMV growth across merchants of all sizes. However, the most encouraging trend is the increasing contribution from larger businesses. This shift toward larger customers strengthens Shopify’s revenue base and highlights its ability to compete beyond small-business e-commerce.
Another catalyst is Shopify’s offline business. Offline GMV increased 33% year over year in the first quarter. The trend suggests that larger retailers are increasingly adopting Shopify’s unified commerce platform to manage both digital and physical sales channels.
At the same time, business-to-business (B2B) commerce is becoming another important growth driver. During the quarter, Shopify’s B2B GMV surged 80% year over year, reflecting strong customer adoption.
Further, Shopify’s payments ecosystem continues to gain momentum. International markets are proving particularly promising. Shop Pay’s international volume grew significantly, and the momentum is likely to sustain in the coming quarters.
Overall, growing enterprise adoption, rapid expansion in offline and B2B commerce, and accelerating payment volumes all point to a swift recovery in Shopify stock.