Shopify (TSX:SHOP)(NYSE:SHOP) has had an incredible year. In May, the company became the largest company in Canada when its market cap surpassed that of Royal Bank of Canada. In fact, this had been a move years in the making, as Shopify’s past three-year performance completely blew all other Canadian companies out of the water.
Earlier this year, the TSX announced that the e-commerce company placed in the top spot of the TSX30. This indicates that Shopify stock has been the most impressive performer over the past three years (+1,043%). Its next closest peer was Ballard Power Systems, which posted a gain of 459% over that time. Indeed, Shopify stock has been red-hot since its IPO. Does this stock still have room to grow? In this article, I make a case for why Shopify stock is one you need to own in 2021.
This company could be Canada’s first $1 trillion company
Currently, there are only four North American stocks that are a part of the $1 trillion club; all were established in the United States: Alphabet, Amazon, Apple, and Microsoft. In order to become a stock of this size, companies need to lead an emerging, important industry for many years. For example, Apple emerged as an early leader within the smartphone space, and Amazon is the undisputed leader among online shopping companies.
Shopify is making a case for its ability to lead companies that operate within the online store builder space. Among English-speaking countries, no other provider of online store websites is used more than Shopify. Currently, it claims more than 1,000,000 merchants as customers. More impressively, the company has listed mega-businesses like PepsiCo, Tesla, and Kraft Heinz as customers.
Shopify’s main source of revenue comes from its subscription fees and the fees that it imposes on merchants per transaction. Therefore, as e-commerce and online shopping continue to be more widely adopted, worldwide, Shopify should reap the benefits of this large trend. Over the Black Friday-Cyber Monday weekend, Shopify announced that its merchants had sold a total of $5.1 billion worldwide. That number smashes any previous Black Friday-Cyber Monday weekend in history.
What’s even more impressive is that countries like Canada have reported that online sales currently only account for about 11% of all retail sales. Considering regions like Africa have less than 1% online penetration, the growth story is clear.
Shopify is the runaway leader among online store builder companies. This leadership position has been reflected in its stock price, which was reported to have gained 1043% at the announcement of this year’s TSX30 list. If Shopify is able to maintain its leadership position over the next few years, it could very well become Canada’s first $1 trillion company. At its current market cap of about $180 billion, the company poses a very attractive investment proposition.
Shopify is one of the top positions in my portfolio. The reasons above make it clear that every Canadian investor should consider doing the same.
Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.
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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Jed Lloren owns shares of Apple, Microsoft, Shopify, and Tesla. David Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Amazon, Apple, and Tesla. Tom Gardner owns shares of Alphabet (A shares), Alphabet (C shares), Shopify, and Tesla. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Microsoft, Shopify, Shopify, and Tesla and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.