In an article published earlier today, I’d mentioned that I’d doubled down on my Shopify (TSX:SHOP)(NYSE:SHOP) position. Clearly, I am still very bullish on this company, even after its 176% increase in stock price this year. However, I am not alone in this boat. Many investors remain bullish on Shopify’s growth prospects, a sentiment further strengthened by the company’s performance last month. In this article, I will discuss the different reasons investors remain bullish on Shopify.
The company’s addressable market is large and continues to grow
E-commerce is being pegged by many, including me, as the industry to watch in the next decade. Online shopping penetration rates remain low around the world. However, the pandemic has shown that consumers are willing to make the shift in favour of e-commerce.
Since 2014, global e-commerce sales have risen from $1.3 trillion to $3.5 trillion. It is estimated that the global ecommerce market will account for $4.97 trillion by 2021. This represents an increase of 400% over the past seven years.
Areas to watch include Canada, Africa, and South America. These areas have notably lower penetration rates compared to areas like the United States and United Kingdom. As these regions continue to accept online shopping more widely, watch for Shopify to jump at the opportunity to grow.
Everyone can benefit from Shopify’s platform
Staying close to the topic of its addressable market, Shopify’s platform is available to anyone wishing to own a business regardless of its size. The company offers a variety of plans which allow merchants to operate online stores whether they be a first-time store owner or a large enterprise like Tesla.
Shopify’s attractive business model and inclusivity can be seen in its ever-growing monthly recurring revenue. Since Q2 2014, Shopify has never seen a decline in monthly recurring revenue. At that time, the company reported a monthly recurring revenue of $5.10 million. In Q2 2020, that number had grown to $57 million. This figure continues to grow; in Q3 2020, the company reported $74.4 million in monthly recurring revenue. Indeed, the future looks bright for this young company.
Shopify has a world-class management team
Founder-CEO Tobi Lütke was the individual who wrote the very first line of code in what would later become the Shopify platform. Today, he remains very actively involved in the company’s day-to-day operations. He is known for his very long-term view for the company, willing to sacrifice short-term performance in hopes of optimizing the company’s chances of success in the long run. Lütke also has a lot of skin in the game, holding more than a 6% ownership stake in the company.
Other notable members of the Shopify executive team include Harley Finklestein and Jean-Michel Lemieux. In addition to fulfilling their roles with the company, both individuals have been known to be very active on social media. They have been engaging with merchants and other interested parties throughout the year in hopes of ensuring Shopify stays on its path to make commerce greater for everyone.
Investors, both institutional and retail, remain bullish on Shopify. Some of the many reasons for this sustained sentiment include Shopify’s large addressable market, attractive business model, and outstanding management team. Shopify stock has increased more than 176% in 2020, but investors around the world continue to expect big things from the company moving forward.
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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.
Fool contributor Jed Lloren owns shares of Shopify and Tesla. David Gardner owns shares of Tesla. Tom Gardner owns shares of Shopify and Tesla. The Motley Fool owns shares of and recommends Shopify, Shopify, and Tesla.