There’s no question that Shopify (TSX: SHOP)(NYSE:SHOP) has risen to become among the most disruptive of Canadian companies over the last five years. The stock has skyrocketed, allowing many early investors to double up many times over, and with an infamous short-seller trying to bring the stock back down to Earth, it seems as though the Shopify multi-bagger opportunity is gone, and that a massive round of capitulation will be in the cards moving forward.
While Shopify stock has begun to run out of momentum over the past year, there are many reasons to believe that the Shopify growth story may just be in the early innings, and I’ll tell you why.
E-commerce has arguably been the most profound tech trends to emerge over the last two decades, and naturally, as a standout e-commerce play, Shopify is seen as the go-to Canadian way to bet on the powerful tech trend.
As a digital platform provider for small-and-medium-sized businesses, Shopify is in a league of its own. And although churn rates, drop shipping customers, and various other non-transparent aspects of the business are potential causes for concern, longer-term investors are more forgiving because, for many, Shopify is seen as the only investible e-commerce option that’s on the TSX.
But the real reason why Shopify may have more good days ahead of it is the fact that the company continues to be on the cutting edge of its e-commerce niche. And although some may believe e-commerce innovation is peaking, as you can now buy almost anything online these days, you’d be foolish (that’s a lower-case ‘f’) to think that e-commerce in its current state will be the same as it’ll be in 10, 20 or 30 years from now.
Where’s the puck headed for e-commerce, and what’s the advantage that Shopify has over its peers?
Picture Augmented Reality (AR) stores for a moment, where prospective customers can view 3D renderings of a product they’re thinking of purchasing before they pull out their credit cards.
Now consider a presence (either human or AI-powered) that can answer your questions as if you were in a brick-and-mortar store if you have concerns that may prevent you from following through with your purchase.
The next wave of e-commerce may seem far-fetched, profound, or unfathomable, but it’s what’s up next, and Shopify knows this. In simple terms, Shopify is skating toward where it thinks the puck is headed next, and many competitors are skating toward where the puck has already been.
Shopify’s distinct advantage is its ability to innovate, which has been demonstrated through the incredibly eyebrow-raising technological initiatives that the company has been working on in the background. Shopify has been working vigorously with 3D models and AR stores. And although the initial version of Shopify AR won’t be as jaw-dropping, sooner or later, the AR store experience will improve and become as natural to us as buying stuff on your phone with just the click of a button.
The “innovation awe” will eventually wear off; it’ll just be the norm of how people buy things, as Shopify’s less-tech-savvy competitors roll up their sleeves to create the digital stores of the future.
Foolish takeaway on Shopify
Shopify isn’t just in a hot industry. It’s a top dog in this industry, as its strength lies with its creative R&D team.
Today, Shopify caters primarily to SMB-sized firms, but that doesn’t mean it can’t expand beyond the confines of its current niche. If Shopify’s AR store technology is as game-changing as it could be, Shopify could eventually find itself moving in on the turf of Amazon.com, Inc. And if that happens, Shopify’s best days could be ahead of it.
Stay hungry. Stay Foolish.
