Is Shopify a Millionaire-Maker?

Let’s dive into whether Shopify (TSX:SHOP) is truly a millionaire-maker stock investors should consider at current levels.

| More on:

Formerly the quintessential “millionaire-maker” stock, Shopify (TSX:SHOP) trades on the Toronto Stock Exchange as one of the most traded stocks in the market. It has seen incredible growth, with SHOP stock rising an impressive 3,400% since its IPO, and at its peak, it soared an incredible 6,031%. To put that into perspective, your $10,000 initial investment in Shopify might have grown to more than $600,000. Those who have held since its IPO and put $30,000 into the stock are currently millionaires.

Now, this stock is down considerably from its peak. And despite a recent pullback, it’s still a highly valued company, making these sorts of returns unlikely moving forward. But for those with enough fresh capital to put to work, it does appear Shopify can be a millionaire-maker stock over the long term.

Let’s dive into why.

Understanding Shopify

Shopify provides a robust e-commerce platform designed mostly for small- and medium-sized enterprises. Its subscription solutions, which are split into two sectors and accounted for 43% of sales in the fiscal year 2018, allow merchants to perform e-commerce on a variety of platforms, including their websites, physical stores, pop-up shops, kiosks, and even social media sites like Facebook and Amazon. To help with e-commerce operations, its merchant solutions – which accounted for 57% of fiscal 2018 revenue – offer add-on products like Shopify Payments, Shopify Shipping, and Shopify Capital.

As the e-commerce economy grows, Shopify stands poised to capture significant market share and grow its revenue and earnings at a market-beating rate. Those who have bet on the company to do so have been well-rewarded, but it’s clear the size of the total pie and Shopify’s dominance are growing. If the company can rival Amazon in the e-commerce space over the long term (a big ask, I know), it’s entirely possible another growth wave could take this stock much higher over the long term.

Is now the time to buy Shopify?

The pandemic produced quite an incredible boost for Shopify, with the company seeing triple-digit revenue growth and producing consistent profits. The growth bar has been considerably lowered for the company as these pandemic-driven headwinds have waned. Accordingly, the company’s valuation is much more in line with its future growth prospects than it has been in a long time.

At a forward price-earnings ratio of 62 times, Shopify stock looks reasonably valued, given the growth potential the company provides. Shopify’s retail sales penetration rate of 15% in North America is strong, though this number dips to 2% globally. The question is how quickly and aggressively Shopify can gobble up global market share. The company’s potential for exponential growth will likely continue to be driven by innovation and development strategies, including the integration of AI into its platform.

Bottom line

Over the long term, I like Shopify’s positioning in the e-commerce market. This is a sector that simply doesn’t get the love it deserves right now. Given where interest rates are and the dynamics in the market, that makes sense.

But if we do see interest rates come down and a resurgence of growth stocks in the market, Shopify stands poised to capture big gains for investors. Whether that means it’ll make any individual investor a millionaire depends on the amount invested and the price paid. But right now seems like a decent time to get into this high-growth player, in my view.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Chris MacDonald has positions in Amazon. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Amazon. The Motley Fool has a disclosure policy.

More on Tech Stocks

bulb idea thinking
Tech Stocks

The Smartest Canadian Stock to Buy With $1,000 Right Now

Strong financials, booming demand for its services, and an expanding presence in AI and cloud computing hardware make Celestica the…

Read more »

doctor uses telehealth
Tech Stocks

3 Tech Stocks I’m Looking to Buy in February

These tech stocks will deliver solid gains driven by the deployment of AI and investments in omnichannel commerce and digital…

Read more »

Burning semiconductor CPU
Tech Stocks

Is AMD in Trouble After Wednesday’s Stock Drop?

Shares took a painful hit after the chip designer's fourth-quarter report.

Read more »

An investor uses a tablet
Tech Stocks

If I Could Only Buy and Hold a Single Stock, This Would Be it

Despite more than doubling in value over the last six months, I still find BlackBerry stock undervalued based on its…

Read more »

chip with the letters "AI" on it
Tech Stocks

Celestica Stock Trading at All-Time High: What’s Next?

Celestica stock is beating Nvidia, surging 1,358% since October 2022. Today, it is trading at its all-time high. Is there…

Read more »

dividend growth for passive income
Tech Stocks

2 Growth Stocks That Could Turn $10,000 Into $24,800 by 2030

These resilient growth stocks could grow your money.

Read more »

Credit card, online shopping, retail
Tech Stocks

Where Will Shopify Shares Be in 5 Years?

In addition to Shopify’s consistently growing sales and expanding profit margins, its focus on long-term growth initiatives could help its…

Read more »

money goes up and down in balance
Tech Stocks

2 TSX Stocks to Buy and 2 to Avoid in the Looming Trade War

The looming U.S.-Canada trade war has changed the business environment. Here are some TSX stocks to buy and avoid in…

Read more »