The e-commerce sector has been seeing rapid growth, as the internet becomes more accessible to different parts of the world. As a result, traditional merchants have increasingly moved their businesses toward digital offerings to expand their reach to consumers.
For growth stocks such as Shopify (TSX:SHOP), this has provided a boon for business. During the pandemic, the company saw its business surge, as merchants looked to stabilize their revenue and earnings in difficult times. Accordingly, it shouldn’t be a surprise to many to learn that Shopify brought in revenue of $4.6 billion in 2021, which surged by a massive 57% over 2020 levels.
To quote Harley Finkelstein, Shopify’s president, “the last two years have been extraordinary.” While 2022 has shown slower growth than what was seen last year, over the long term, this is a company with multi-bagger potential. Here’s why investors may want to consider this long-term growth stock at these levels.
Shopify’s sales hit a record
The growth in online shopping in previous pandemic years has provided for more stringent competition in the e-commerce platform space. Indeed, SHOP stock soared massively in 2021. However, 2022 wasn’t as great as the previous year for this stock due to competition and other factors.
Rising inflation along with Fed rate hikes did not help matters. This has led to Shopify’s valuation compressing significantly, with the company’s stock price now down more than 80% from its highs seen last year.
That said, I think the company’s long-term growth trajectory remains intact. Additionally, at these lower levels, Shopify provides 10-fold growth potential if it can simply exceed its previous all-time highs by a small margin. Thus, this is a stock with historical performance that suggests a 10X return isn’t ridiculous.
This is supported by the company’s numbers, which surged 17% year over year this past Black Friday. It’s estimated that the company’s ecosystem brought in $3.36 billion in one day alone. Most of this increase has been generated from Canada, the U.S. and the U.K.
This growth continued through the weekend, resulting in an overall sale of $7.5 billion between Black Friday and Cyber Monday. This signifies a further increase of 19% year over year. For those looking for growth, Shopify continues to prove that this is a platform that’s leveraged to highly secular growth trends worth considering for the long term.
Bottom line
Over the near term, SHOP stock is one that could provide more downside. We’re still in an overly bearish market, with little indication that things will dramatically improve. With the macro environment remaining bearish, investors may have reason to steer clear of a stock like Shopify.
That said, over the long term, this company’s growth potential remains unmatched as far as Canadian companies are concerned. Thus, this remains my top pick for investors looking for growth at a much more reasonable price right now.
