Shopify (NYSE: SHOP) is a behind-the-scenes business investors should pay attention to.
Shopify’s e-commerce platforms have proven wildly popular. These services bridge suppliers to retailers and consumers. In fact, the Shopify platform is advanced to the point that it can decipher buying trends and habits to help retailers sell with optimal efficiency.
Those who follow the marijuana legalization movement are adamant Shopify is in the cat bird’s seat to benefit from the relaxation of cannabis laws across the United States. It appears as though New York state and several other states will legalize recreational marijuana in the next year or so. The question is whether Shopify is positioned to capture an ever-growing portion of global market share as the years ahead unfold.
Shopify helps businesses design, establish and operate online stores. The company assists with the processing of orders, payments, marketing campaigns and plenty more. Shopify gauges overall online performance through cloud-based analytics. The company is revered for tirelessly working to improve relationships with customers. Think of this company as one-stop shopping for enhancing e-commerce. In fact, Shopify even provides merchant cash advances by way of its financial business known as Shopify Capital. The Shopify platform features an array of intriguing new features from wholesale channels for buyers to Shopify Pay, bulk label prints and beyond. it is clear Shopify has a lot going on.
Shopify emerged as an investor darling in 2016 and 2017. Unfortunately, the company has a long streak of decelerating revenue. Top line growth peaked in 2015 only to decrease upwards of 61% this past quarter. Shopify executives are aiming for $257 million in revenue this current quarter. This revenue would equate to 50 percent top line growth. Though Shopify adjusted earnings were better than expected, investors still need to see a consistent string of impressive earnings to truly believe in this company.
Every good investor understands the importance of diversification. Shopify has diversified better than the competition. Though diversification might seem like a subtlety, it is actually quite important as a collection of varied revenue streams greatly reduce risk. As an example, Shopify’s Shopify Plus has had a fantastic quarter. Shopify Capital has also produced stellar financial results to boot. The constant push to increase revenue sources and come up with new offerings is a large part of what drives the Shopify crew to be the best.
Adobe/Magento has its fans, yet no one would select it over Shopify unless they were uninformed of each’s merits. Shopify is clearly the superior solution. The CEO of Shopify, Tobi Lutke, has stated he would welcome some additional competition aside from Adobe’s acquisition of Magento to heighten urgency.
This seems to be an honest assessment of the competition. Though Lutke’s team might not be operating as urgently as they could be, the fact that there is minimal competition is excellent news for Shopify investors.
The bottom line is Shopify provides more than software. The business is fundamental to e-commerce operations as a whole. This company has emerged as an indispensable problem solver for businesses of all varieties. It is reasonable enough to anticipate Shopify will continue to benefit as e-commerce becomes that much more important in the years ahead.
If you own Shopify, retain a portion of your position. This is the type of stock you should buy in 2018, check in on a couple of times per year, and consider selling three or more years down the road.
Shopify is currently priced around $155. If it dips down to the high $140s, consider adding some shares to your portfolio. Alternatively, if you have owned Shopify for a while, consider taking a portion of your profits off the table and waiting for a minor dip to re-establish a new position.
So, don’t let short-term revenue growth concerns drive you away from this stock. Consider adding a small stake in Shopify to your long-term portfolio and it will likely generate some fantastic results in years to come.
Regards,
Ethan Warrick
Editor
Wealth Authority
