The Motley Fool

Why Shopify Inc. (TSX:SHOP) Can Be the Canadian Amazon (NASDAQ:AMZN)

Image source: Getty Images

Amazon is a company that requires no introduction. The e-commerce retail giant is well on its way to a trillion-dollar market cap. The stock was worth a little over $1,800 per share as of close on April 2. Amazon has shaken the retail landscape to its core over the past two decades and is setting its sights on new subsectors like grocery and pharma as we head into the next decade.

Shopify (TSX:SHOP)(NYSE:SHOP) has been an amazing success story in its own right. The Ottawa-based company has seen its stock soar over 700% since its initial public offering (IPO) back in May 2015. Shares had increased 70% year-over-year as of close on April 2.

Amazon has acted as a disruptor through its massively successful online platform. Shopify offers a cloud-based commerce platform for small and medium-sized businesses. The company operates through its subscription solutions and merchant solutions segments. Shopify’s model of empowering individual merchants and winning from their success has made it the most appealing tech stock on the TSX.

In 2018 Shopify saw revenue hit $1.073 billion, which represented a 59% increase from the prior year. Subscription solutions and merchant solutions revenue grew 50% and 67%, respectively, over 2017. Gross merchandise volume (GMV) hit $41.1 billion, was up 56% from GMV in 2017.

In the fourth quarter, Shopify posted Black Friday Cyber Monday sales of $1.5 billion through its merchant channels, up from $1 billion over the same period in 2017.

Adjusted net income more than doubled-up in 2018 to $39.2 million, or $0.37 per share compared to $15.2 million, or $0.16 per share in the prior year. The number of merchants achieving over $1 million in GMV increased by 58% from 2017 to 2018, and total merchants on the platform grew at a monthly rate of 24%.

The company projects revenues in the range of $1.46 billion to $1.48 billion in 2019. Shopify will continue to benefit from the expansion of e-commerce retail sales relative to traditional sales as we move into the next decade.

Retail sales in Canada fell 0.3% in January 2019 to $50.1 billion. Sales dropped in 4 of 11 sub-sectors, which represented 52% of all retail trade. As was the case in the prior disappointing month, e-commerce was one of the few bright spots. On an unadjusted basis, retail e-commerce sales hit $1.5 billion in the month of January, which accounted for 3.4% of all retail trade. Retail e-commerce rose 12% year over year.

It is difficult to apply a true value to Shopify. Currently it boasts a $30 billion market cap. The company has come under fire from short-sellers in the past because of its evasiveness regarding information on its merchant growth. In addition to this, Shopify has also had to battle with concerns over its profitability.

All these considered, Shopify is still the most explosive growth stock in the Canadian market. The stock is pricey right now, but shares have settled in closer to neutral territory as of close on April 2. Its footprint in the fast-growing retail e-commerce sector make it a fantastic target for investors on the hunt for quick growth, even if it does come at a high price.

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of Amazon, Shopify, and Shopify. Shopify is a recommendation of Stock Advisor Canada.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.