Shopify (NYSE: SHOP) is currently priced at $93 in the stock market, up from $70 in mid-April. It was priced at a paltry $28 in May 2015m and a measly $32 in July 2016.
To say this stock is on fire would be an understatement. However, it has some room to rise before re-approaching its 52-week high of $100.80. One has to wonder if Shopify is due for a serious correction, or if it can continue its astonishing climb.
Let’s take a look at what this company does, and whether it is poised to continue its remarkable upswing.
Shopify’s Business
Shopify is an e-commerce businesses headquartered in Ottawa, Ontario, and makes computer software for online businesses in addition to retail point of sale technologies.
The company originated in 2004. The original business was based on the founders’ software for the online snowboard store they previously launched. It has since blossomed into an e-tailing juggernaut.
Shopify’s API platform debuted in June of ’09. This offering empowers developers to build applications for Shopify online outlets and sell them through the Shopify’s App Store. Shopify store owners can view and manage their online stores through iOS devices.
The company has acquired several businesses since 2012. These include the mobile software developer Select Start Studios, Boltmade and design studios like Tiny Hearts and Jet Cooper.
Over 400,000 unique merchants make use of this e-commerce company’s software, helping its gross merchandise volume to grow beyond $34 billion. Part of Shopify’s mass appeal is attributed to its Shopify Payments that lets merchants take credit card payments without needing to implement a gateway for third party payments.
A massive breakthrough occurred in September of 2015 when Amazon decided to close the Amazon Webstore service in order to lean on Shopify as its preferred migration provider. This past January, Shopify announced an integration with Amazon that empowers merchants to sell products on Amazon by way of Shopify stores. The company even offers a credit card reader powered by Bluetooth for traditional purchases in brick and mortar retail outlets.
Does Shopify Have any Weaknesses?
The popular consensus is that Shopify provides a direct, clean and intuitive platform. High-profile publications regularly heap on the praise for this e-commerce power player.
The company’s chief executive officer, Tobias Lutke, was named as the CEO of the year in 2014 by The Globe and Mail. Some have criticized Shopify executives for allowing the conservative news outlet Breitbart News to use the company’s platform to host a shop. Though some might construe this development as bad publicity, it won’t drive a significant number of businesses or customers away. You really have to dig to find anything bad about this insanely successful e-commerce superstar.
Some Wall Street analysts have set price targets around $90, meaning the stock might be nearing a ceiling. Goldman Sachs analyst Jesse Hulsing recently downgraded Shopify due to valuation concerns. Shopify’s price-to-forward ratio is 13.
This nugget of data combined with the stock’s relatively high price will undoubtedly scare away many potential investors. Yet potential buyers should take a moment to marinate on the fact that Shopify beat out Amazon, forcing the e-commerce giant to partner with them rather than continue to attempt to compete with them. This is an incredible feat that few companies can lay claim to.
Winning the Future
E-commerce sales represent nearly nine percent of total sales in the United States. This figure will only continue to grow as time progresses and people become more reliant on the Internet.
Vendors can pay less than $10 to take advantage of Shopify’s platform. This is an incredibly cheap introductory price point that will undoubtedly attract flocks of new businesses in the coming months and years.
Shopify really is the perfect solution for small and medium-sized businesses that lack the resources required to bring their offerings to the web. Even large businesses are benefiting from Shopify. Massive companies like Red Bull and AB InBev use Shopify as a profitable portal to rack up merchandise sales. The alliance with Amazon is the icing on the cake.
Do not feel as though you missed the boat on Shopify. The stock is on quite the winning streak, yet there is no sign Shopify has any glaring weakness that will send shares tumbling. Buy Shopify today, and you just might get in the door before the company is acquired. Look for the stock to rise to $100 or higher by the end of the year.
Regards,
Ethan Warrick
Editor
Wealth Authority
