A Beginner’s Guide for Investing in E-Commerce

Canadians looking to invest in e-commerce stocks should look to Shopify Inc. (TSX:SHOP)(NYSE:SHOP) and others in September.

| More on:
Index funds

Image source: Getty Images

The COVID-19 pandemic has thrown some sectors back years. In the worst cases, like the movie theatre industry, there are fears that its impact could represent a mortal threat. But some spaces have received a boost due to the pandemic. Retailers have faced massive challenges in 2020. Consumers in North America and around the world were already moving progressively to digital channels. However, the COVID-19 pandemic has accelerated the growth of e-commerce.

Today, I want to discuss how new investors can jump in on some of the best e-commerce stocks Canada has to offer.

This top e-commerce stock has soared over the past five years

Shopify (TSX:SHOP)(NYSE:SHOP) is an Ottawa-based technology company that debuted on the TSX back in 2015. It provides a cloud-based multi-channel commerce platform for small- and medium-sized businesses around the world. Shares of Shopify have climbed 178% year over year as of close on September 10.

Earlier this month, I’d discussed the promising growth trajectory in the e-commerce software space. Grand View Research recently projected that the global e-commerce market would grow at a CAGR of 16.3% from 2020 through 2027. In Q2 2020, Shopify delivered total revenue growth of 97% to $714.3 million. Meanwhile, gross profit increased 83% to $375 million.

This company continues to draw huge attention due to its high-growth potential. Moreover, it boasts an immaculate balance sheet. Investors who are looking to start in e-commerce can do a lot worse than Shopify to kick off this decade.

Don’t sleep on this under-the-radar TSX stock

Lightspeed POS (TSX:LSPD) is another e-commerce software stock that often lives in Shopify’s shadow. This should not be the case. Lightspeed stock has increased 16% in 2020. The company has managed to distinguish itself as a top technology stock on the TSX that is worth targeting in the e-commerce space.

Investors got a look at the company’s first-quarter fiscal 2021 results on August 6. Recurring software and payments revenue climbed 57% year over year. Meanwhile, total revenue rose 51% to $36.2 million. It posted an adjusted EBITDA loss of $2.2 million — down from its loss of $5.1 million in the prior year. Like Shopify, Lightspeed also possesses an excellent balance sheet.

Lightspeed does not possess the dynamic growth potential of Shopify, but it is still a worthy target that has managed to rack up recurring revenue growth in recent quarters.

One Canadian retailer that bet early on e-commerce

Some retailers have fallen behind by putting a large stake in brick-and-mortar locations. Institutions like Sears Canada that had thrived for decades were forced to shutter their doors under this pressure. However, other retailers have adjusted far better. Canada Goose has been conservative with its on-the-ground store openings and has invested a lot in its e-commerce channels.

Canada Goose is entering the busy season in the next few months. In fiscal 2020, the winter clothing retailer fought off tough headwinds and achieved revenue growth of 15.4% to $958 million. Moreover, the stock possesses a price-to-earnings ratio of 28. This puts it in favourable value territory relative to industry peers.

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.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Canada Goose Holdings, Shopify, and Shopify. The Motley Fool owns shares of Lightspeed POS Inc.

More on Tech Stocks

A close up image of Canadian $20 Dollar bills
Tech Stocks

4 Cheap TSX Stocks to Buy Now Under $20

These low-priced stocks have strong growth prospects due to their reliable revenue streams and growing scale.

Read more »

TFSA and coins
Tech Stocks

Now Is the Time to Add These 3 Stocks to Your TFSA Portfolio

The sharp pullback in fundamentally strong TSX stocks presents a solid opportunity for buying.

Read more »

online shopping
Tech Stocks

Shopify (TSX:SHOP): A Top TSX Growth Stock for 2022’s 2nd Half?

Shopify (TSX:SHOP)(NYSE:SHOP) stock is an e-commerce darling that's suffered a massive fall from the very top of the Canadian market.

Read more »

Target. Stand out from the crowd
Tech Stocks

Why Constellation Stock Belongs on Everyone’s Buy List

Constellation (TSX:CSU) stock provides a valuable investment for those seeking strong growth for years to come, even in a weak…

Read more »

online shopping
Tech Stocks

Shopify Stock: Can it Stay Above $400?

Shopify (TSX:SHOP)(NYSE:SHOP) stock has sunk over 80% from its peak level. Is there any value to be had by catching…

Read more »

Online shopping
Tech Stocks

Shopify (TSX:SHOP) Stock: Is the Bottom Here Yet?

If you can predict when a stock has fully bottomed out, you can maximize the return potential by locking in…

Read more »

Tech Stocks

2 Cheap Tech Stocks to Buy After Their Impressive Earnings

Given their healthy growth prospects and discounted stock prices, I am bullish on these two tech stocks.

Read more »

value for money
Tech Stocks

3 Tech Stocks Trading for a Significant Discount

These tech stocks have corrected quite a lot, despite the strength in their business, making them attractive long-term bets.

Read more »