The year and the decade is coming to an end, and hopefully, the pandemic too. The next decade will see the emergence of the digital world. Data will fuel almost every industry’s growth. A better way to start 2021 is by investing in technology that will change the face of every industry. Here I will focus on the future of retail.
While e-commerce has been here since the 1990s, it was only in 2020 that it became a new normal. If you invest in the right e-commerce stock now, it can convert your $6,000 to $100,000 by 2025. One such stock is Lightspeed POS (TSX:LSPD)(NYSE:LSPD).
The future of retail
The future of retail is immersive. Your kids might shop at the physical store, and you check their cart and make the payment at the comfort of your home. This is just local. It might also go global. Sitting in Canada, you can buy groceries for your parents in India. Lightspeed POS and Shopify (TSX:SHOP)(NYSE:SHOP) gave Canadians a glimpse of the future of retail in 2020.
According to U.S. Census Bureau data, e-commerce retail sales formed 11.8% of all U.S. retail sales in the first quarter. When the pandemic confined everyone to their homes, e-commerce contribution rose to 16.1% of U.S. retail sales in the second quarter. That is where Amazon and Shopify flourished. Their stocks surged 110% and 224%, respectively, between March and early September.
As the economy reopened in late September, e-commerce retail sales contribution fell to 14.3% in the third quarter. That is where Lightspeed flourished, with its stock rising 106% between October and December. Its omnichannel solution goes beyond e-commerce and helps retailers and restaurants operate their online and physical stores on a single platform and the company saw a sudden dip in subscriptions in the second quarter as physical store traffic moved online.
Lightspeed therefore enhanced the immersive nature of its platform. It introduced curbside pickup, online booking, and food ordering. When the stores opened, retailers and restaurants saw a surge in traffic through online booking and online purchases. In an interview, Lightspeed CEO Dax Dasilva said that the Lightspeed platform is turning from being “a nice to have” technology to be a necessity.
Lightspeed stock five years from now
Lightspeed is on the verge of becoming the next Shopify. It earns money through subscriptions and transaction-based commissions. The only way it can grow is by increasing the volume of subscriptions and transactions and retaining this volume. For that, it is expanding its operations geographically and broadening its customer base. It is currently facing the challenge of customer retention. But it is continuously enhancing its platform to make it sticky.
Lightspeed can achieve the level of growth Shopify achieved. It is expanding in the United States through acquisitions (ShopKeep and Upserve). It has also broadened its customer base to include golf clubs and is now serving more than 1,000 golf courses worldwide.
At present, Lightspeed has a gross transaction volume (GTV) of $8.5 billion. Shopify was at this level in the fourth quarter of 2017. Today, Shopify has a GTV of $30.8 billion. In these three years, Shopify stock converted a $10,000 investment to $110,000.
If Lightspeed replicates Shopify’s growth even in five years, it’s a remarkable feat. The major challenge will be competition from bigger players like Square and Shopify. Shopify has come up with a retail POS to tap the immersive retail opportunity.
How to invest in Lightspeed through TFSA
Even though Lightspeed stock has surged more than 600% in the last nine months, it has the potential to grow another 3,000%, pandemic, or no pandemic. When investing in such high-growth stocks, you might attract high taxes. Hence, I would suggest using the Tax-Free Savings Account (TFSA) contribution limit of $6,000 to invest in Lightspeed. However, the growth stock has the risk of volatility, so invest with caution.
Here are some more stocks that have a bright future.
One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting...
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago - before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!
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 Puja Tayal has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify and Square. The Motley Fool owns shares of and recommends Amazon, Shopify, Shopify, and Square. The Motley Fool owns shares of Lightspeed POS Inc and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.