The Lucrative Growth of Shopify

Fact: Shopify’s stock price has soared almost 4,600% since the e-commerce group went public five years ago.

The company, which recently partnered with Facebook to help businesses create virtual storefronts on the social network, priced its shares at $17 at the time of its IPO on May 21, 2015. They’ve surged by almost 46 times.

Shopify partnered with Facebook and launched Facebook Shops. Facebook Shops will allow sellers to create customized online storefronts on Facebook and Instagram. Facebook Shops will soon became a valuable tool for business in the era of coronavirus and  will make it easy for users to find and buy your products in the Facebook app.

Also a briefing from the company emphasises this fact:

“Right now, many small businesses are struggling, and with stores closing, more are looking to bring their business online. Our goal is to make shopping seamless and empower anyone from a small business owner to a global brand to use our apps to connect with customers. That’s why we’re launching Facebook Shops and investing in features across our apps that inspire people to shop and make buying and selling online easier.”

In a Guardian article, Profesor Sean Sands, a retail and e-commerce expert at Swinburne University, Melbourne noted that despite the company’s success, Shopify remains anonymous.

If you’d invested $5,100 in Shopify in 2015, when the company went public, your initial investment would be worth around $111,000: an astronomical 2,076% return on your investment. But Shopify still hasn’t achieved mainstream consumer recognition. “It’s everywhere, but nowhere at the same time,” explains Sean Sands.

Many think that this is an ambitious move that would position Shopify as a competitor to Amazon or Etsy, fighting for market dominance. But Harley Finkelstein doesn’t think so. Finkelstein, Shopify’s chief operating officer insistent that they aren’t trying to steal Amazon’s crown.

The intention is not to make a marketplace, but to allow consumers to find not only new local businesses, but also to interact with their favourite brands.” Unlike Amazon, Shopify won’t hold stock – brands will control their own supply chains, unless they choose to use Shopify’s shipping capabilities. – Finkelstein says.

The rise in Shopify’s stock price has boosted its market capitalization from $1.3 billion to $86 billion. The gains reflect the company’s impressive growth: revenue has grown from $67 million in 2014 to $1.6 billion in 2019.

For all of you reading this article, the burning question is of course: Is Shopify stock a buy right now?

Aparna Narayan in an analysis for ivestors.com thinks that Shopify ticks off many of the boxes that investors should be looking for. SHOP stock was a big winner in 2019 and again in the coronavirus market rally. Key acquisitions and expansions promise more runway for growth.

While Shopify’s [SHOP] share price wasn’t immune from the volatility – seeing a downturn lasting from late February until mid-March – it has certainly bounced back, soaring over 121% since 21 March. The company delivered a big Q1 surprise. Q1 earnings thrashed Wall Street expectations. In the latest quarter, Shopify posted earnings of $0.19 per share, beating an expected loss. Revenue of $470 million also beat expectations, up over 47% compared to the same quarter last year. Longer term, analysts are betting on big Shopify earnings growth.

Narayan concludes that from a technical viewpoint, Shopify stock been acting bullishly in the coronavirus stock market, but SHOP stock is extended, meaning shares are not in a proper buy zone.

A similar analysis is found also on OPTO:

Given how far ahead of analyst estimates the stock is trading, investors might do well to wait for a discount on the stock. An average analyst price target of $512.55 is a hefty 59% below the current share price. Of the 29 analysts tracking the stock on Yahoo Finance, 18 rate it either a Strong Buy or a Buy.

What we can say for the moment is that apart from your decision to trade Shopify stock or not, the e-commerce giant is definitely the one to watch right now.

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