Could Shopify Stock Help You Become a Millionaire?

With Shopify expected to grow its sales by 20% annually for the foreseeable future, is it the perfect stock to buy now and hold long term?

Daniel Da Costa ❯

Daniel joined the Motley Fool Canada team in 2019 with years of experience in banking and investing. Growing up the son of a proprietary stock trader and educator, Daniel’s always found joy in helping Canadians to improve their financial situations. With the Motley Fool, Daniel sees an even more rewarding way to impact Canadians positively. A student and great admirer of Warren Buffett, he’s always looking for investments offering growth at a reasonable price. Outside of finance, Daniel enjoys spending his time with family, sailing, and watching Formula One.

Published January 10, 2024 4:30 pm EST

Although a lot of investors focus on finding stocks that can grow rapidly in a short period, to grow your capital significantly, you have to take advantage of compound interest and invest for the long haul. That’s why a stock like Shopify (TSX:SHOP) is one of the best investments you can make in Canada and one of the top companies that can help you become a millionaire.

In the early years of Shopify trading on the stock market, it grew at an unbelievable pace. After going public in 2015, Shopify gained an impressive 60% in its first full year of trading in 2016. Then, in 2017, it gained another 120% before gaining 50% in 2018.

When a stock reports such impressive growth as Shopify did early on, investors can get caught worrying about “locking in their profits” and look to sell the stock while it’s still high. However, it’s far better to hold a long-term growth stock like Shopify for years to take advantage of the power of compounding.

From the time it went public to the end of 2019, Shopify earned investors a total return of 500%. However, if you had held Shopify stock until today, your total return would be over 3,350%.

So it’s essential that when you find a high-quality stock that demonstrates years of growth potential, you buy and hold it for the long haul. Doing this with various high-quality stocks is the best way to grow your money and eventually become a millionaire.

Does Shopify stock still have the same growth potential going forward?

With Shopify stock now worth over $135 billion, it makes sense to question whether the stock can keep up the same pace of growth. Given its track record of performance and plans to expand operations, it’s no wonder why so many analysts and investors are bullish on the high-potential tech stock.

First, Shopify has committed to making the business more efficient to improve its margins and, consequently, the free cash flow it generates.

However, Shopify’s shift to focus more on large enterprises is even more intriguing. Initially, Shopify stock boomed due to its growing popularity as a merchant to small and medium-sized businesses. And while it’s still a leader in this space, Shopify is also looking to grow its presence in the enterprise sector.

This not only offers a new avenue for growth for Shopify, but dealing with larger, more established businesses could also lead to more stable and predictable revenues for Shopify, helping to mitigate some risks.

Besides the cost-cutting and increased focus on the enterprise segment, Shopify has a tonne of potential to grow its sales internationally. Currently, Shopify generates less than 5% of its total sales outside of North America and China, giving it a massive runway for growth to continue expanding internationally.

So it’s no surprise that for 2023 and the next three years, analysts expect Shopify stock to grow its revenues by roughly 20% annually.

Is the Canadian tech stock one of the best investments to buy now?

When you consider what an impressive track record Shopify has, how much it has helped the e-commerce industry to grow in popularity, and how much potential e-commerce has to continue growing in the future, especially as technology continues to improve, Shopify certainly seems like one of the best long-term growth stocks to buy to help you become a millionaire.

For 2023, analysts expect Shopify will report revenue just shy of $7 billion, a roughly 25% increase from 2022, even while the economy has faced significant headwinds.

Even more impressively, though, analysts believe that by 2027, Shopify will have already doubled its revenue again, when analysts are predicting it will do over $14.5 billion in sales.

Furthermore, and more importantly, as Shopify continues to make its operations more efficient, analysts are predicting a rapid increase in profitability. For example, in 2022, Shopify barely broke even and reported a net margin of just 0.8%. By 2027, though, analysts believe Shopify’s net margin could be upwards of 20%, and it could earn more than $3 billion in net income.

So if you’re looking for a high-quality and high-potential growth stock to buy now that can help you become a millionaire, Shopify is certainly one of the top stocks in Canada to consider.