Shopify (TSX:SHOP) is a Canadian e-commerce giant that’s been among the best-performing growth stocks in the market since its inception. One look at the company’s stock chart below (zoomed out for maximum effect) is truly remarkable. And despite a dip following the pandemic, Shopify has since returned to greatness, providing gains of more than 100% since its trough a couple years ago.
Here’s are three reasons why I continue to pound the table on Shopify as a long-term growth bet worth making at current levels.
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Growth beyond e-commerce
Many investors are well-aware that Shopify operates the premier e-commerce platform for small and medium-sized businesses looking to set up an online presence. However, the company’s recent addition of payment processing (Shopify Payments), fulfillment (Shopify Fulfillment Network), and an expanding range of financial services, has extended its ecosystem and revenue growth potential over the long term.
Indeed, providing an even more comprehensive suite of solutions for merchants enables Shopify to extract greater value along the retail supply chain. Shopify’s platform has been further strengthened by its investments in automation and artificial intelligence. Shopify Magic is one of the solutions that use AI to streamline the operations of merchants.
Strategic partnerships and key initiatives
Shopify’s strategic moves have solidified its position as an industry leader. The company’s alliances with well-known companies, such as Google and Amazon, are meant to increase merchant reach and enhance offerings. Shopify has announced that it has strengthened its connection with Amazon’s “Buy with Prime” service, enabling its merchants to provide their customers with Prime perks.
Additionally, in order to improve its logistics skills and give its merchants faster delivery times and better customer experiences, Shopify has purchased a number of businesses, including Deliverr. As the company continues to integrate its network with those of others, I think Shopify’s moat should continue to grow over time.
Strong financials
At the end of the day, an investment decision comes down to financials. Indeed, many investors who are value focused want to know that the price they’re paying isn’t exorbitant. Accordingly, seeing continued growth quarter to quarter is important to many investors. And for those who have been following Shopify, growth has returned nicely following a slowdown after very difficult pandemic comps.
The company’s merchant base has continued to swell, leading to a surge in free cash flow of more than 240% year-over-year this past quarter. I’d attribute some of this to Shopify’s excellent suite of products and support team. But I’d also say that the growing popularity of e-commerce has been a key contributor to the company’s continually outstanding revenue growth.
Shopify’s capacity to draw in new merchants while keeping hold of its current clientele is another key driver I think is likely to continue, leading to additional profit and revenue growth over time.
