Why I Own Shopify Stock

Many investors have decided to stay away from Shopify stock this year. Here’s why I own it and would even continue buying shares.

| More on:
Online shopping

Image source: Getty Images

Many investors have decided to stay away from Shopify (TSX:SHOP) stock due to its weak performance this year. However, prior to this year, Shopify has been one of the most popular stocks in Canada since its initial public offering (IPO). In fact, at its highest point, Shopify stock generated about 6,300% in returns since its IPO price. However, today it trades nearly 83% lower than its all-time high.

In this article, I’ll discuss why I still own Shopify stock and will continue buying shares.

The case for the e-commerce industry

The first reason why I’m still so interested in Shopify stock is because of the potential within the e-commerce industry. One of the keys when it comes to investing in growth stocks is to find companies that operate in important and emerging industries. In my opinion, the e-commerce industry is one of the most exciting areas to invest in. Statistics indicate that its penetration of the global retail industry continues to increase.

In fact, in the first quarter (Q1) of 2021, e-commerce sales represented about 13% of all American retail sales. This compares to about an 8% share in Q1 2016. In the United Kingdom, e-commerce sales represented about 27% of the retail industry in July 2021. Again, we can compare this to a 15% share of the retail industry in July 2016.

It’s important to note that younger consumers represent an interesting proportion of the general e-commerce base. In 2020, it was reported that consumers aged 25 to 34 represented the largest group of online shoppers (20.2%). Further, consumers aged 34 and younger represented nearly 40% of online shoppers in the United States in that year. This suggests that younger consumers are driving the e-commerce industry. Because of this, I predict that the industry could continue to increase its penetration of the global retail industry in the future.

The case for Shopify in particular

Now, Shopify is an interesting stock in particular because of its leadership position within the e-commerce industry. As of Q2 2022, Shopify held the second-largest share of the American e-commerce industry. It has managed to do that by offering a platform that appeals to everyone, from first-time entrepreneurs to large-cap enterprises.

Shopify also gives its merchants every opportunity to get in front of consumers. It does this by partnering with important consumer-facing businesses. For example, Shopify’s enterprise partnership network includes the likes of Meta Platforms, Walmart, Spotify, and YouTube, among many other big-name companies. This network provides Shopify merchants a greater chance of achieving success, because consumers will be consistently led to their stores.

Finally, Shopify’s business continues to grow, despite the many struggles it has faced this year. Over the past five years, its monthly recurring revenue has grown at a compound annual growth rate of 35%. It’s true that its overall growth rate has slowed. However, it’s important to note that all growth stocks are facing a difficult economy to operate in. If Shopify can continue to grow during times like these, imagine the heights it can reach once the economy bounces back.

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.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Fool contributor Jed Lloren has positions in Shopify and Spotify Technology. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Meta Platforms, Inc., Spotify Technology, and Walmart Inc. The Motley Fool has a disclosure policy.

More on Tech Stocks

stock data
Tech Stocks

If I Could Only Buy 1 Stock Before 2023, This Would Be It

This stock is the one company that really doesn't deserve its ultra-low share price, so I'll definitely pick it up…

Read more »

consider the options
Tech Stocks

WELL Health Stock Rose 3.4% in November – Is it a Buy Today?

The last few years have been explosive for Well Health. Take advantage of current stock price weakness to gain exposure.

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Tech Stocks

3 Tech Stocks That Are Too Cheap to Ignore

Given their solid financials, healthy growth prospects, and discounted stock prices, these three tech stocks look attractive.

Read more »

Dad and son having fun outdoor. Healthy living concept
Tech Stocks

Prediction: These Will Be 2 of the Strongest TSX Stocks in 2023

Tech stocks may have dropped during the last few years, but these two TSX stocks are bound for major growth…

Read more »

edit Person using calculator next to charts and graphs
Tech Stocks

This 1 Tech Stock Is My Hands-Down Choice Over Shopify

A small-cap tech stock with consistent revenue growth and nearly 300% profit growth is a better option over the TSX's…

Read more »

edit Women wearing red sweater shopping online and using credit card at home office
Tech Stocks

Down by 62%: Is Shopify Stock Worth Adding to Your Portfolio Now?

Shopify (TSX:SHOP) stock has been rallying since November began but still trades for a discount, and it might be a…

Read more »

data analyze research
Tech Stocks

2 TSX Growth Stocks I’d Buy and Hold Forever

Given their long-term growth potential and discounted stock prices, I believe these two TSX growth stocks would be an excellent…

Read more »

A worker uses the cloud for paperless work. tech
Tech Stocks

1 Little-Known Canadian Stock to Buy Before Everyone Else Does

Softchoice is a top TSX stock for value and growth investors due to its widening profit margins and top-line expansion.

Read more »