For investors looking to grow their wealth over the long term and live the retirement they’re planning out in their minds, setting aside some of one’s hard-earned capital and putting that money to work in a top growth stock such as Shopify (TSX: SHOP) has been a great bet.
Now trading at a market capitalization of more than $300 billion and recently hitting a new all-time high, Shopify is about as impressive of a growth stock as there is in the market.
The thing is, when many investors look at the Canadian stock market, they may not expect such world-quality growth stocks available to choose from.
Here’s why I think such investors are wrong and Shopify still looks like a rock-solid pick here.
Source: Getty Images
E-commerce growth heating up
Thus far during this holiday shopping season, we’ve seen some intriguing data put forward in both the U.S. and Canada. Shoppers did spend more as a whole on an inflation-adjusted basis. However, the vast majority of this increase came via the world of e-commerce, with traditional bricks-and-mortar retail locations seeing an inflation-adjusted decline on a year-over-year basis.
What does this mean? It means that companies utilizing Shopify’s e-commerce platform have outperformed those that didn’t. And with consumers looking for greater variety and doing their shopping online first, capturing those clicks and turning them into sales is what Shopify does best.
With new AI integrations feeding even more consumers toward Shopify platforms and enticing them to click “buy,” the sort of transaction volume-based fees that Shopify earns could be poised to continue rising, until this trend ceases. I don’t see a likely situation where that’s going to be the case.
Fundamentals matter
I have to admit, I was bearish on Shopify for a while there. Concerns from short sellers around churn, as well as Shopify’s lack of profitability, had me sitting on the sidelines. I guess I’m just one of those investors who has to see the profitability to believe it will be there.
Well, Shopify has turned into an absolute profit machine, bringing in nearly $2.5 billion in net income over the past year, with plenty of more growth on the horizon.
For investors who believe that Shopify will be able to retain its dominant market position as a leader among e-commerce platform providers, I think there’s plenty of upside ahead.
