If you owned Shopify Inc. (TSX: SHOP)(NYSE: SHOP) stock at the beginning of the year, then you know the answer. Shopify’s share price has more than doubled from $191.91 on January 1 to $412.16, at the time of this writing. The real question is, “Can Shopify double your money again?”
Shopify shows amazing growth
Shopify, which started as an online snowboard shop, is now an e-commerce powerhouse. In 2018, the company topped $1 billion in revenue for the first time.
Shopify provides individuals and small businesses a single platform to design, set up, and manage their stores across multiple sales channels, including social media, mobile sites, pop-up shops, and traditional brick-and-mortar locations.
The company has grown to over 800,000 merchants in 175 countries. In addition to its subscription fees, Shopify makes money through digital payments and fulfillment services. In 2018, subscriptions made up 43% of revenue, while other services accounted for the remaining 57%.
Shopify takes on Amazon
Shopify plans to spend upward of $1 billion on its fulfillment network over the next four years, making it more competitive with Amazon, the largest retailer in the world.
In mid-October, Shopify announced that it had completed its acquisition of 6 River Systems. This move merges 6 River System’s years of experience in fulfillment software and robotics with Shopify’s heavyweight e-commerce platform.
With this acquisition, 6 River Systems adds cloud-based software and collaborative mobile robots operating in more than 20 facilities in the U.S., Canada, and Europe. As part of the deal, 6 River Systems will continue to build and sell their warehouse solutions.
Shopify is also in the process of revamping its fulfillment services network. This improved network is designed to increase on-time deliveries, reduce shipping costs, and provide a better experience for the platform’s merchants and their customers.
Several analysts expect Shopify to exceed one million merchant customers by the end of this year — feat that would catapult Shopify above eBay to the second-largest e-commerce platform in North America, behind only Amazon in the top spot.
Despite its fast-paced rise this year, the stock had a recent hiccup.
During a three-week period beginning in late August, the share price fell from its all-time high of $524.34 to $412. The stock has been trading in this range since mid-September.
The fall corresponded with the company’s announcement that it had completed an offering of 1.9 million Class A subordinate shares worth US$600 million in total. The offering added cash to Shopify’s balance sheet but diluted shareholder equity. Clearly, stakeholders were unimpressed by this move.
The bottom line
The recent pullback in Shopify’s stock has given investors an opening to buy. Shopify has shown tremendous growth since its humble beginnings and has proven to be a force in the competitive world of e-commerce.
With the company’s massive capital expenditure to expand its fulfillment services, the company aims to become a viable threat to Amazon’s current dominance in the marketplace.
While the stock price may not double within a few months, as was the case this year, Shopify certainly has the potential to double your money in the next few years.
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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 Cindy Dye owns shares of Amazon. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool has the following options: long January 2021 $18 calls on eBay.