Why Shopify (TSX:SHOP) Is the Stock to Hold for the Next Decade

Shopify (TSX:SHOP)(NYSE:SHOP) stock might continue to rally, driven by its sky-high growth prospects and superior financial growth.

| More on:

Some businesses floundered, while very few blossomed during the pandemic. Shopify (TSX:SHOP)(NYSE:SHOP) has certainly been one of them. From the first sale to full scale, as the Canadian tech titan describes itself, Shopify provides an end-to-end commerce platform to grow businesses.

Pandemic as a catalyst

Shopify was growing at a rapid pace even before the pandemic. The virus outbreak and ensuing lockdowns emphasized the need for small- and medium-scale businesses to go online. The company’s digital platform indeed came as a life saver and helped many businesses survive during the pandemic shock.

Importantly, the pandemic has substantially altered consumer behaviour, which will accelerate the e-commerce growth for a prolonged period. With offices shifting to homes and with almost zero commutes, the e-commerce industry might achieve a decade of growth in the next few years.

According to research, the global e-commerce market is expected to grow from $3.7 trillion in 2018 to $20 trillion by 2027. That’s a staggering growth rate of 20% compounded annually. Demographic changes, high-speed internet, and convenience will be some major factors driving the growth.

Shopify’s growing market

Interestingly, Shopify still has a tiny share in this gigantic market. Shopify estimates its total addressable market worth $78 billion, with 47 million small and medium businesses globally. Its current annual revenues of close to $2 billion and around million merchants indicate the growth potential for Shopify.

With approximately a 6% share in the U.S. retail e-commerce sales last year, Shopify held the second spot only behind Amazon’s 37%.

Shopify’s all-in-one digital platform offers convenience and wider reach to its merchant customers. It serves entrepreneurs with a monthly plan of $29 and established brands with a plan of +$2000 per month. Its multilingual platform offers customized email marketing tools, 3D product display, and embedded payment service options. These features facilitate better customer engagement and business expansion.

Higher growth prospects of the industry will evidently attract more players eventually. However, Shopify investors might not have to worry much about the newcomer BigCommerce.

It is much smaller compared to Shopify in almost every aspect from size to the number of merchants it serves. It might take years to become BigCommerce as a threat to Shopify and its investors. Notably, that seems unlikely, at least at the moment, as Shopify is doing all the right things.

The rally might continue, despite valuation concerns

Shopify stock has created massive wealth for its shareholders in the last five years. A $10,000 investment in its IPO in May 2015 would have accumulated $476,000 today. That’s a stellar 4,660% return.

Shopify stock has rallied 180% so far this year. The stock continued to rally, despite being significantly overvalued. It has been trading well ahead of its financials for a long time. It looks like Shopify’s earnings and cash flows matter a little to investors. What they value more is its competence to become the next Amazon.

Interestingly, Shopify’s valuation concerns have hardly deterred its rally in the last few years. The stock might continue to rally, driven by its sky-high growth prospects and superior financial growth.

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 Vineet Kulkarni has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, Shopify, and Shopify and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon.

More on Tech Stocks

dividend growth for passive income
Tech Stocks

3 Growth Stocks With Potential Multi-Fold Returns in a Decade

Given the favourable environment and their growth initiatives, these three growth stocks can deliver superior returns in the long run.

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

Who Will Be the AI Winners of 2024? Here Are the Top Contenders

From Nvidia stock's dominance to Palantir's rise, meet the top artificial intelligence (AI) stocks shaping the AI revolution!

Read more »

up arrow on wooden blocks
Dividend Stocks

3 Growth Stocks to Buy and Hold Forever

These growth stocks may seem a bit risky at top heights, but don't count them out for future earnings as…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

This AI Stock Is a Screaming Buy, and Nobody’s Noticing Yet

As BlackBerry continues to integrate AI technology in its cybersecurity as well as IoT solutions, its stock could deliver solid…

Read more »

A worker uses a laptop inside a restaurant.
Tech Stocks

3 Reasons to Buy Shopify Stock Like There’s No Tomorrow

Shopify stock is moving aggressively in the holiday season. Here are two strategies to make money from this stock in…

Read more »

Happy golf player walks the course
Tech Stocks

1 Tech Stock That Has Created Millionaires and Will Continue to Make More 

If you have been procrastinating about investing in this tech stock, you are losing the opportunity to make millions.

Read more »

Doctor talking to a patient in the corridor of a hospital.
Dividend Stocks

CRA Money: The Best Benefit to Claim in 2024

This benefit is one of the most broad ones you can claim from the CRA, yet many of us are…

Read more »

A worker gives a business presentation.
Tech Stocks

Will Shopify Stock Continue its Surge Into 2025?

Down 26% from all-time highs, Shopify is a beaten-down tech stock that continues to grow at an enviable pace in…

Read more »