Growth is everything these days.
Canadian technology mega cap company Shopify Inc. (NYSE:SHOP) has generated out-of-this-world growth for investors for years. This is a company that has blown away analyst estimates and investor expectations each and every quarter since its Initial Public Offering (IPO).
Strong momentum strong that’s likely to remain
Personally, I haven’t seen a company with as much momentum supporting its steady and impressive valuation increase since Amazon.com. In that context, it’s easy to see why investors remain optimistic despite the company’s incredibly high valuation.
Every day that passes with interest rates at zero, we’re seeing more money flow into growth stocks. Equities in a zero interest rate environment will continue to soar, as investors simply have nowhere else to place their cash to earn a return. While Shopify doesn’t pay a dividend, putting some money to work in a company that is growing cash flows at a ridiculous pace could pay massive dividends over the long run.
Growth not likely to slow for a long time
Risks do exist for Shopify in the way of continuing to generate exponential growth. That said, it seems like these risks are less likely than ever to materialize, for a few reasons.
Growth in e-commerce as a percentage of overall retail as accelerated quickly as a result of the pandemic. While this shift was already underway, Shopify’s dominance as the premier e-commerce platform provider is key to this stock’s investment thesis. Right now, Shopify is blowing away the competition in its product offering. Great software products with subscription or SaaS business models are now demanding high premiums, for a reason.
Investors see sky-high growth in near-perpetuity (much as Amazon investors saw in decades past). Therefore, it is conceivable that the company could not only meet, but exceed, the growth that is baked into this stock right now.
We’re not that far away from the $2,000 milestone
Incredibly, $2,000 per share is only a 20% upside from the company’s all-time high reached two weeks ago.
Investors also aren’t sharpening their pencils when it comes to how much is too much for growth stocks right now. Valuations used to find resistance against certain psychological barriers. However, in recent months, we’ve seen these barriers disappear.
Until investors start scrutinizing valuations to a reasonable degree, it’s no only conceivable, but rather probable, that Shopify hits the $2,000 per share milestone soon.
Speaking of Shopify...
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 Chris MacDonald has no position in any of the stocks mentioned. David Gardner owns shares of Amazon. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, Shopify, and Shopify and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon.