Why Shopify (NYSE:SHOP) Stock Belongs on Your Shopping List

April
29, 2021

5 min read

This story originally appeared on MarketBeat

One of the biggest pandemic winners last year was Shopify (NYSE:SHOP), a company that offers a software platform for retailers that helps them set up their stores online. The stock rallied over 179% in 2020 thanks to broad shifts in the retail landscape and unprecedented demand for e-commerce. Many investors were wondering whether or not Shopify’s huge 2020 was simply the result of short-term tailwinds, but the company is still maintaining its strong momentum after its recent blowout Q1 earnings report.

While Shopify is certainly not a cheap stock, there are plenty of great reasons to consider adding shares. Risk tolerant investors that are looking for the cream of the crop in e-commerce stocks should be very interested in Shopify at this time. Here are a few reasons why Shopify belongs on your shopping list.

Revolutionizing the E-commerce Ecosystem

Let’s say you are a business owner that wants to list your products for sale online. If you aren’t an expert in web design, building out an online store on your own is going to be costly and time-consuming. Alternatively, you can consider selling your products on Amazon, which is a ready-made platform with millions of potential customers. The problem with that option is you will be competing against tons of other sellers and will have a hard time creating a unique or strong brand that stands out. On the other hand, you can use the leading e-commerce platform Shopify to start your online store without any technical experience whatsoever and use its powerful e-commerce tools to create a brand that matches your business.

That’s the beauty of Shopify. It’s revolutionizing the e-commerce ecosystem and allowing businesses to build their online stores in an affordable and easy-to-use way. The company offers a free trial period that allows small and medium-sized businesses to see why it’s the best e-commerce platform on the market, then generates revenue from recurring subscription fees and add-ons. The platform can easily handle large inventory and even allows businesses to sell their products through social media sales channels like Pinterest and Facebook. Shopify also provides a point of sale system so businesses can sell their products both online and in person. The bottom line here is that Shopify makes running a business simple and is a major disruptor in the e-commerce market, which is why it’s a stock that is worth buying.

Blowout Q1 Numbers

Shopify stock hasn’t kept up its torrid pace from last year, but that might be changing given the company’s blowout Q1 2021 earnings numbers. Fears that the company’s momentum would slow down in 2021 have been assuaged, as Shopify is still benefitting from digital commerce tailwinds. The company reported total Q1 revenue of $988.6 million, up 110% year-over-year and beating the consensus analyst estimate of $866 million. Investors should also note that more merchants are joining Shopify’s platform, which is evident in the subscription solutions revenue number of $320.7 million, up 71% year-over-year.

As we dive deeper into the company’s huge quarter, there are plenty of additional standout numbers that exceeded expectations. Perhaps the most impressive takeaway is the fact that Gross Merchandise Volume came in at $37.3 billion, up 114% year-over-year and an even larger GMV number than last quarter, which included sales from the holiday season. GMV is a very important metric for e-commerce businesses because it refers to the volume of goods sold on a company’s platform and is often used to determine the health of a company in this space.

Enabling Entrepreneurship 

When it comes to having conviction in a long-term investment, it’s a lot easier if you are on board with a company’s mission and how it is impacting the lives of its customers. That’s another reason to stick with Shopify because it’s a company that is helping entrepreneurs succeed with the help of its platform. Small and medium-sized businesses are the backbone of the economy, and the fact that Shopify provides business owners with things like payment processing, shipping, financing, and an easy way to create their online stores at an affordable price could end up inspiring new generations of business owners to pursue their dreams.

As of now, Shopify powers over 1.7 million businesses in over 175 different countries. The company is likely just getting started in terms of growth, and Shopify estimates that its total addressable market for small businesses is $153 billion. While this company trades at a lofty valuation, there are more than enough reasons to support adding shares at this time. Keep in mind that the stock is still down over 12% from its February highs even after the Q1 post-earnings move, which means there’s plenty of room for the stock to rally at this time.

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