I was initially skeptical of Shopify (TSX:SHOP)(NYSE:SHOP), as I came from a value and dividend investing background; Shopify is the exact opposite of that.
I ended up buying a starter position in the high-growth stock at about US$97 per share in mid-2017. If my memory serves me right, Motley Fool began recommending the stock at about US$46. So, by the time I decided to brave it out and take the plunge, Shopify stock had already doubled.
I’ve ended up adding to the position several more times since then. From my original purchase price, Shopify stock has more than doubled, rising about 150% in less than two years!
The tech company’s results from its latest quarter helped with an 8% boost on the day! Obviously, the high-growth stock must be doing something right (but has also become all the more expensive).
The million-dollar question is — is it too late to buy Shopify?
Here’s why we believe it’s not too late to buy Shopify stock.
High revenue growth
Shopify is still experiencing very high growth. Revenue in the first quarter increased by 50% to US$320.5 million compared to the same quarter a year earlier. At this rate, Shopify is guiding for revenue of US$1.48-1.50 billion this year, which would be about 39% growth over 2018’s record revenue of about US$1 billion.
Shopify’s Subscription Solutions and Merchant Solutions are its sources of revenue. Both increased at double-digit rates — 40% and 58%, respectively, over the comparable quarter in 2018.
Innovation
Shopify continues to invest heavily in research and development (R&D). In the first quarter, it spent more than US$76 million in R&D, which was almost 24% of its revenue.
These are needed investments that allow the tech company to stay ahead of the trend and come out with innovative features that entrepreneurs and its merchants will use.
For example, Shopify recently launched a new retail hardware solution in the U.S. The solution was designed from scratch, with merchants and customers in mind, to transform the in-store shopping experience. The solution helps merchants integrate their online and offline stores, as it connects seamlessly with the Shopify Point of Sale system. The solution, then, offers multi-channel inventory management, secure payments, and a consolidated backend that connects directly with a merchant’s online store.
With the huge amounts of investment that Shopify is spending on R&D, entrepreneurs and merchants can rely on the tech company to come out with useful features that they may or may not think of now and into the future.
The more features Shopify makes available, the stickier entrepreneurs and merchants will be to Shopify.
Investor takeaway
Shopify is the perfect high-growth stock, as it’s a relatively young tech company that was founded 15 years ago and was listed on the North American exchanges in 2015.
Shopify is investing heavily in R&D and building an e-commerce platform, which stays ahead of the curve, for decades to come. And its revenue growth and massive stock price appreciation are proof that it’s doing the right things.
It’s not too late to buy Shopify. No one can get the perfect price on the stock. If you want a piece of the company, average in to a position over time and take advantage of meaningful dips, whenever they may occur.
