The Motley Fool

How Legalization Made Shopify Inc. (TSX:SHOP) Even More Lucrative

U.S. consumers are preparing for what will be a very busy shopping weekend.

The annual Black Friday shopping event is set to kick off tomorrow (or, based on the impatience of some retailers, later today) that will kick start the holiday shopping season. Last year, Americans spent a whopping US$5 billion in the 24-hour period following Thanksgiving over what they spent in 2016, and retailers are expecting much of the same frantic level of retail sales to come this year as well.

Black Friday is followed by “Cyber Monday,” another shopping extravaganza, this one targeting online shoppers. Sales from Cyber Monday also hit a record last year, hitting US$6.6 billion.

That’s a lot of toys, TVs, computers, and Christmas presents.

When retailers do well, so too does the slew of other businesses that are part of the retail process. One such business that is bound to have a very busy, if not completely lucrative weekend is Shopify Inc. (TSX:SHOP)(NYSE:SHOP).

Why I like Shopify —  and why you should too

One of the many things that I love about Shopify is how the company took an existing business model – setting up an online storefront and completely revamped it into a quick, personal, configurable, scalable and cost-effective solution that businesses worldwide can adopt.

To date, the company proudly boasts over one million active users across 600,000 businesses, which comprise an incredible $82 billion in products and services sold on the platform. The interesting part is that that figure is still a drop in the bucket in terms of long-term potential.

One such example is Shopify’s role in the recent rollout of the legal cannabis industry across Canada. Shopify has forged contracts with many of the larger companies operating in that sector and stands to profit significantly as the lucrative new sector continues to attract attention and garner sales. Specifically, sales from B.C., Newfoundland and Labrador, Ontario, and P.E.I are being processed through the platform.

More important to note, however, is what Shopify’s involvement in the legalization rollout means for other segments of the economy, where privacy concerns or strict regulatory requirements exist meet high demand and strict privacy requirements. Shopify set up servers in Canada that could, in theory, become the baseline for other government or regulatory businesses to conduct online transactions.

Shopify COO Harley Finkelstein recently alluded to that, noting that regulated industries in other countries will take notice and consider Shopify for their own implementations.

Final thoughts

Shopify came to market at a perfect time, capitalizing both on the explosion of mobile commerce as well as the necessary shift in thinking that traditional retailers have been forced to adopt. Both of these have allowed Shopify to record incredible growth, which for the foreseeable future appears set to continue.

Investors looking to diversify their portfolio with a position in a tech stock that has inroads to retail will find that Shopify represents a lucrative long-term growth opportunity.

Our #1 Stock to Buy in 2018 (and Beyond!)

When you buy heavily cyclical stocks at low prices… and then hold the shares until the cycle reaches its peak… you can make a very healthy profit.

Every investor knows that. But many struggle to identify the best opportunities.

Except The Motley Fool may have a plan to solve that problem! Our in-house analyst team has poured thousands of hours into their proprietary research – and this is the result.

Our top advisor Iain Butler has just identified his #1 stock to buy in 2018 (and beyond).

The last time this stock went from the low point of its cycle to the peak… shares shot from $12 to $40 inside of 4 years. That’s an 300%-plus return. And if you missed out on that ride, today might just be your second chance.

Click here to claim Iain’s new report, absolutely FREE!

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and Shopify. Shopify is a recommendation of Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.