Shopify (TSX:SHOP) is one of the biggest e-commerce platform providers in the world and one of the highest-growth stocks on the Canadian stock market. Since its decline in 2022, the company has witnessed significant growth in the market, with shares of Shopify stock roughly tripling off their lows.
That said, I think there’s plenty more upside where that came from. Here’s the one hidden catalyst I think investors should be focusing on when it comes to Shopify right now.
International, baby
Shopify’s core offering is well-known in the North American market, with an impressive penetration rate of around 15% in its core market. The company’s e-commerce platform provides steady and stable cash flows via transaction fees, with a growing software-as-a-service business model that adds the stability long-term growth investors seek.
The thing is, while growth may slow in the company’s North American market, there’s a clear opportunity for outsized growth in additional global markets. Shopify’s global growth strategy isn’t necessarily a secret — the company has been expanding into new markets for some time. However, as the company pursues additional partnerships and growth strategies in various BRICS nations, I think top- and bottom-line growth could accelerate faster than the market suggests.
Financials look solid
Last year, Shopify brought in a whopping $7.1 billion of revenue, representing a rise of 26% on a year-over-year basis. Tailwinds from continued e-commerce growth and strong performance from the company’s subscription services segment drove these results.
On the bottom line, gross profit of $3.5 billion is impressive, signalling overall margins of around 50%. With those kinds of margins, expansion into new markets becomes even more lucrative over time. That’s partly why Shopify stock surged over the past year, more than doubling on a peak-to-trough basis.
Can this rally continue?
Shopify’s strong traction in its core U.S. market remains the bedrock investors look to for stability long term. However, the company’s long-term growth outlook in other high-growth nations provides the sort of fuel growth investors want to see as a reason to invest in this stock at its current multiple.
I think Shopify stock looks reasonably valued at less than 70-times earnings, and think this is a stock that could have plenty of room to run with future earnings beats.
