Shopify (TSX: SHOP) is among the top-performing growth stocks in the Canadian stock market. As Shopify is such a popular choice among investors, there are certain facts that every investor must know about it. In this article, we have covered three essential facts on Shopify. Read along to gain further insights about the same.
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The company’s business model is timeless
Shopify is a Canada-based multinational e-commerce platform. The company uses cutting-edge technology, which provides a platform for merchants to manage, design, market, and sell their products and services efficiently. It primarily caters to small- and medium-sized businesses in the United States, Canada, Singapore, and Ireland.
Shopify’s platform allows merchants to manage various types of business processes like product management, inventory management, analytics tracking, payment and order processing, and much more. Accordingly, for those bullish on the long-term growth and profitability trajectory of the e-commerce space, Shopify remains a top pick worth considering.
Enhanced profitability
Last year, Shopify’s stock price grew up to 120%. Notably, it is expected that the price growth will continue this year as well. That’s due to a number of factors, including the company’s dominating market share and increasing profitability. Last quarter, the company made US$901 million in gross profits, which is up 36% from FY2022, and reported growth in growth margin to 52%.
This year, Shopify’s growth is expected to be in the mid-20s range as Shopify continues to focus on reducing headcount and increasing financial discipline. Moreover, Shopify offloaded its logistics arm to Flexport, which allows the company to focus on its core areas of expertise.
Unexplored growth opportunities
Being a well-grown and established company, Shopify still has immense growth opportunities that remain unexplored. The year-on-year retail sales penetration rate in North America is 15%. Notably, that number is expected to grow, as the U.S. and Canada are its primary markets. Shopify’s offline revenues are also growing, and it has barely taken over 2% of retail sales in North America and 0.5% globally.
Lastly, a positive macroeconomic outlook is expected to support an uptrend in stock price. Shopify stands to benefit from the Federal Reserve’s cutting cycle, which was last observed in 2019. As bond yields decrease, investors will gain more confidence in taking on more risk and divert their investments toward stocks to seek higher returns. On a similar note, businesses are also expected to thrive as the interest rate is lowered.
Bottom line
Enhanced profitability, unexplored growth opportunities, and positive macroeconomic circumstances are key catalysts to watch. Indeed, if these catalysts align in 2024, Shopify could have yet another banner year.
I’m not of the view that all-time highs are in order in the coming months. However, as we’ve seen with previous rallies, anything’s possible.
In any case, Shopify remains a growth stock that long-term investors will at least want to watch this year.
