Shopify (TSX:SHOP) is one of the largest e-commerce platform providers in the world and one of the highest growth stocks on the Toronto Stock Exchange. Since its lows in 2022, Shopify has witnessed remarkable growth, tripling in value as the company’s revenue and income surged to much higher levels.
Of course, questions remain as to whether this growth can continue. Here’s why I remain bullish on Shopify from here.
Growth-based business model
Shopify broadly benefits from growth trends tied to continued e-commerce activity over time. The company provides an easy-to-use e-commerce platform for small- and medium-sized businesses to set up online shops. Charging transaction fees, Shopify benefits directly from its network effects over time, with earnings and cash flow growth largely in line with the growing size of its ecosystem.
For those bullish on the impressive uptrend we’ve seen in e-commerce continuing for years to come, Shopify remains an obvious choice in this current environment. The company’s software-as-a-service business model is attractive, providing the kind of cash flow stability that many investors want to see. Accordingly, as Shopify continues to expand into new markets, its upside potential is exponential over time.
Although the stock has come down from its post-pandemic high, it’s clear that the benchmarks Shopify is now being assessed against are more reasonable. This is a company that looks well-positioned to manage its way through future market cycles. This is why Shopify remains the best high-growth stock in the Canadian market, and one so many continue to bet on it.
Strong financials promote increased interest from growth investors
Shopify’s recent financial results, which I’ve highlighted in the past, are impressive. The company’s total revenue of $7.1 billion in 2023 was 26% higher year over year. That kind of growth is hard to come by, particularly for a company of this size. As Shopify continues to adopt and integrate additional artificial intelligence (AI) features into its model, some analysts are projecting growth rates that could accelerate over time.
I think such a view is prudent. The company’s recent surge is tied to fundamental growth catalysts that are real and could provide sticky network effects over time. If that’s truly the case, this is a stock that could have plenty of upside from current levels.
Why this is a top growth stock to buy
As the world continues to evolve, the need for e-commerce solutions is only going to increase. Those bullish on the future of commerce continue to focus on this sector for that reason. Shopify remains one of the best pure-play ways to play this space, in my view. If the company can continue to gain market share against giants in this sector, the future e-commerce-driven world could benefit Shopify investors to an outsized degree.
The company’s focus on emerging markets and expanding into new markets should drive considerable improvements in the coming quarters. Additionally, I think many investors are sleeping on the company’s potential when it comes to AI. If there’s one space AI can transform, it’s this one. And Shopify is making the right investments in that regard.
