High-growth stocks tend to be some of the most popular choices for long-term investors, as they offer the highest potential returns. Shopify (TSX:SHOP) has proven itself over the past decade as a must-have growth stock for investors’ portfolios. The company continues to benefit from high revenue growth rates and continues to work on lowering its expenses.
Analysts continue to remain bullish on Shopify for many of these same reasons. For long-term investors looking to build generational wealth, there’s a reason why this Canadian stock remains a top option.
Let’s dive into what makes Shopify special in this regard.
Timeless business model
As an e-commerce platform provider, Shopify uses advanced technology that allows merchants to manage, market, design, and sell products. With its efficient business model, the e-commerce platform caters to small and medium businesses in Canada, the U.S., and many African, Asia Pacific, and Middle Eastern countries.
On the Shopify platform, merchants can opt for features to improve efficiency in product management, analytics tracking, and inventory management. Moreover, it offers features like unlimited bandwidth, multiple payment options, personalized domains, app integrations, and more to sellers.
Shopify has gained notoriety among investors who look forward to long-term investment with capital growth from the e-commerce sector. Investors must also note that SHOP stock more than doubled last year. Accordingly, many investors expect much of the same in the years to come if the macro environment remains conducive for growth stocks.
Fundamentally, there’s also a strong case to be made for Shopify. The company’s third-quarter results showed a gross profit of US$901 million. This represents an impressive year-over-year surge of 36%. Additionally, top-line growth of more than 50% drove most of the enthusiasm around this company and its impressive rally.
Plenty of growth catalysts remain
Despite being an immensely successful e-commerce company, Shopify has yet to explore several growth opportunities. Lately, analysts have noticed that Shopify’s offline revenue is slowly growing to match its massively successful online business.
As per recent data, Shopify’s earnings from offline sales have touched 2% of retail sales in North America and 0.5% in the international market. The company’s year-on-year retail sales penetration is only 15% in North America. This can potentially grow in the forthcoming days, as Canada and the U.S. are its primary markets.
Furthermore, like many other businesses, analysts anticipate that SHOP stock could see an uptick as interest rates fall. Thus, now may be a great time for those who haven’t already done so to consider adding a position.
Bottom line
Shopify has faced its fair share of headwinds following the return-to-normal trade post-pandemic. However, this company has still generated impressive performance over the past five years, with the stock vastly outperforming the market. Since its inception, Shopify’s returns come in at a staggering 41% compounded annual growth rate.
In the e-commerce space, Shopify is a prominent player in North America, competing with the very best mega-cap stocks. I think this is a company that’s well-equipped to capitalize on frequently shifting market trends. The company’s recent focus on cost-cutting measures and an asset-light business model bode well for long-term investors.
