The tech sector in the Toronto Stock Exchange (TSX) is on a tear in 2020. Tech stocks are advancing at blinding speed and outperforming the 10 other primary sectors by a mile. As of December 30, 2020, the sector’s year-to-date increase is 57.11% versus the general market’s 2.81%.
However, one company is a cut above the rest. Its success is phenomenal in that it has dislodged Royal Bank of Canada as the largest publicly listed company by market capitalization. Shopify (TSX: SHOP)(NYSE:SHOP) is the leader of the sector that now represents close to 10% of Canada’s primary stock market.
Shopify’s total return year to date is a jaw-dropping 191%. For the second time in as many years, the $182.91 billion cloud-based multi-channel commerce platform made it to the TSX30 list. In 2019, the stock ranked second to Canopy Growth. This year, Shopify is number one and earned the highest honour on account of its 1,043% return over the last three years.
Phenomenal is an understatement
Aspiring entrepreneurs and small business owners finding their place in the sun have a virtual go-to destination in Shopify. Regardless of your enterprise’s size, Shopify can help you establish an omnichannel retail presence and grow from there. You don’t have to spend much, but the sales or business you can generate is massive.
Many investors have gotten rich, too, with Shopify. The company’s founders did not anticipate explosive business growth, but it was a sight to behold for them when it was happening. It’s unbelievable that today’s share price is $1,500.33 versus the $31.25 closing price on Shopify’s market debut on May 21, 2015.
If you’d invested $10,000 on its second day and still held the shares on December 30, 2020, your investment would be worth $480,105.60. The money growth is a staggering 4,701%. Shopify shares are expensive, but the growth runway appears very long still.
Massive ecosystem
Adoption of online shopping will continue to accelerate in 2021 globally. Shopify played a crucial role in building a massive ecosystem that helps store owners and sellers peddle their products and services online. The company is even funding the capital requirements of merchants. In the most recent quarter, financial support reached $250 million.
Aside from the monthly subscription fees, Shopify generates substantial revenues from payments, fulfillment, capital, and shipping services. The merchant solution segment contributes 68% to the company’s top line. Year over year, it has grown by 132%. In early December 2020, Black Friday and Cyber Monday sales topped $5.1 billion — a record-breaking feat.
The road ahead
Expect Shopify to scale greater heights and replicate its stellar success in 2020. More merchants and small businesses will need turnkey solutions without denting their measly capital. The bigger merchants will have the means to integrate digital and in-store operations with ease. Overall, the volume of businesses transitioning to online sales will exponentially grow.
Would-be investors will have second thoughts about buying Shopify shares at the present level. However, some analysts recommend a buy rating, because of the ensuing e-commerce growth. Shopify is an Amazon in the making, and it’s never too late to take a position. You stand to reap high returns from its growth potential.
