Here Is How Shopify (TSX:SHOP) Stock Could Double in 2020

Here is a scenario that could send Shopify Inc. (TSX:SHOP)(NYSE:SHOP) stock soaring in 2020.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

When you take a decision to invest in high-growth stocks, the bet you make is that the company has a much more room to grow and its stock will deliver returns that will easily beat the market. Those investors who’d bought the shares of high-flying technology stocks in the past decade made a killing.

One Canadian stock that fits well in this group of high-octane stocks is the e-commerce giant Shopify (TSX:SHOP)(NYSE:SHOP). Its stock is up more than 150% in 2019, adding to 1,248% surge in the past five years.

If you’re thinking of taking a position in this tech darling now, the basic question comes to mind: Does this eye-popping rally have more legs?

There is no doubt that the risks to growth stocks are rising. The lingering trade war between the U.S. and China has begun to take its toll on the industrial economy, and the central banks have started to act by cutting interest rates.

I don’t think Shopify, which provides e-commerce platform to both small and large companies, will remain immune if the economy slows or recession hits the global economy. For that reason, it’s hard to make a bullish call for companies that are tied to global growth.

Shopify’s strength 

But one important difference in the case of Shopify is that the company is serving a market that is in a cyclical uptrend and doesn’t seem to be near saturation. 

One of the main strengths of Shopify is that it offers small businesses a very effective and cost-efficient way to building a secure online store. The platform handles all the hardware security, data backup, and payment processing aspects of the business, freeing up merchants to just focus on their core businesses.

The company last month reported that sales grew 48% to US$362 million in the second quarter, beating expectations. Shopify raised its 2019 revenue guidance to a range of $1.51 billion to $1.53 billion.

“Our strong performance in the second quarter reflects the success of our ongoing activities and investments to help merchants start selling, sell more, and sell globally,” said Chief Financial Officer Amy Shapero.

In addition to helping companies with online sales, Shopify now also offers services at the point of sale in brick-and-mortar stores. In the second quarter, Shopify introduced new services such as 3D modeling for product listings and multilingual, multicurrency checkout options, as well as an upgraded point-of-sale system.

That being said, Shopify has never gone through a full economic cycle, meaning that it has not yet been tested through the economic downturn of the magnitude that we saw in 2008. Does Shopify have a business model strong enough to withstand a full-blown economic recession?

In my opinion, it certainly does. No matter how the economy performs, the shift to e-commerce isn’t going away. Both small and large companies can’t stop investing to make their e-commerce channels more attractive and easier to use. And Shopify is at the centre of this revolution.

Bottom line

It’s hard to predict where Shopify stock will trade in 2020, or how badly its growth will be affected if the global economy slips into a recession. But, over the long run, Shopify is a great growth name for investors to cling to and to take advantage of weakness when and if it comes

Should you invest $1,000 in Shopify right now?

Before you buy stock in Shopify, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Shopify wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $18,750.10!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 35 percentage points since 2013*.

See the Top Stocks * Returns as of 1/22/25

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.

Fool contributor Haris Anwar has no position in the stocks mentioned in this article. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of Shopify and Shopify. Shopify is a recommendation of Stock Advisor Canada.

If You Thought Apple and Microsoft Were Big, You Need to Read This.

The steel industry produced the world's first $1 billion company in 1901, and it wasn't until 117 years later that technology giant Apple became the first-ever company to reach a $1 trillion valuation.

But what if I told you artificial intelligence (AI) is about to accelerate the pace of value creation? AI has the potential to produce several trillion-dollar companies in the future, and The Motley Fool is watching one very closely right now.

Don't fumble this potential wealth-building opportunity by navigating it alone. The Motley Fool has a proven track record of picking revolutionary growth stocks early, from Netflix to Amazon, so become a premium member today.

See the 'AI Supercycle' Stock

More on Tech Stocks

Man holds Canadian dollars in differing amounts
Tech Stocks

The Smartest TSX Stock to Buy With $500 Right Now

D2L is a TSX tech stock that is growing revenue and cash flow at a steady pace, enabling it to…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Missed Out on Nvidia? My Best AI Stocks to Buy and Hold

Missed Nvidia stock’s blazing growth? Discover Paylocity (NASDAQ:PCTY) and another AI growth stock poised for long-term gains

Read more »

Canada day banner background design of flag
Tech Stocks

Invest in These 3 Unstoppable Canadian Stocks for the Next Decade

Looking for some Canadian stocks that could continue an unstoppable upward trajectory? Here are three to look at for 2025.

Read more »

Digital background depicting innovative technologies in (AI) artificial systems, neural interfaces and internet machine learning technologies
Tech Stocks

The Best AI Stock to Invest $1,000 in Right Now

Taiwan Semiconductor Manufacturing is an AI stock that is poised to deliver market-beating gains to shareholders in 2024 and beyond.

Read more »

cloud computing
Tech Stocks

2 TSX Technology Stocks Set to Dominate in 2025

Global supply chain complexities amid tariff concerns could help these two TSX tech stocks soar in 2025 and beyond.

Read more »

how to save money
Tech Stocks

The Smartest Growth Stock to Buy Right Away With $5,000

If you want a growth stock, you want a company that has a stable path forward. So, let's look into…

Read more »

dividends grow over time
Dividend Stocks

These 3 Canadian Stocks Could Triple in 5 Years

These three Canadian stocks are in a prime position for future growth. But some patience may be needed along the…

Read more »

chip with the letters "AI" on it
Tech Stocks

2 Top Canadian AI Stocks to Buy in January

Here's why Kinaxis (TSX:KXS) and Docebo (TSX:DCBO) look like two top Canadian AI stocks worth buying to kick off 2025.

Read more »