SHOP Stock Is Poised for Growth
If your forehead scrunched up in confusion at the name Shopify Inc (NYSE:SHOP), do not be alarmed. Most U.S. investors are completely oblivious to this e-commerce star for one simple reason: it is based in Ottawa, Canada.
Barring this one oddity, SHOP stock is simply phenomenal. It averaged revenue growth of 105.3% over the last three full-year periods. Not only does that kind of growth put Shopify in the upper echelon of tech stocks, but it makes this company an undiscovered gem. (Source: “Shopify Announces Second-Quarter 2016 Financial Results,” Shopify Inc, August 3, 2016.)
Seriously, how often do you find a no-name tech stock that doubled its sales almost every year?
It’s unheard of, yet this is exactly the situation that every investor dreams about. Next to being the actual founder or venture capitalist (VC) who got in at the ground floor, finding a great stock that isn’t traded to death is the best-case scenario in finance.
Moreover, SHOP stock is one of my favorite “Digital Fortress Stocks.”
Just to recap: “Digital Fortress Stocks” are tech companies with a strong position in a young market. Shopify fits the bill perfectly, considering how the economy is tilting toward freelancers and entrepreneurs. There are no more lifetime positions at big companies, no job security, and certainly no employee loyalty.
What we have now is the “gig economy.” But let’s back up a little. What exactly does Shopify do?
According to the company’s web site, it is the “leading cloud-based, multi-channel commerce platform designed for small and medium-sized businesses.” But that may as well be Greek to the average investor, so allow me to translate: Shopify helps other companies set up their online stores.
Think about it: brick-and-mortar shops have “physical storefronts.” Anyone walking down 34th Street in New York City can stumble across Macy’s flagship department store in Herald Square. They can see some of the products in the window, and maybe they’ll even go inside. That’s why real estate agents are constantly saying, “Location! Location! Location!”
But selling things across the Internet is a little different. It is highly unlikely that anyone will stumble onto the web site of a newly formed business, because there are millions of web sites out there. The digital pathways are a lot more chaotic than 34th Street, which is why Shopify helps make sense of them.
It pools together all the places that companies can sell their wares, leaving them with a real-time understanding of how their business is doing. This helps companies maximize the chances of someone stumbling onto their “digital storefronts,” regardless of whether they came through social media or a Google search. The business owners just open their Shopify accounts and all their data is displayed neatly in one place.
Starting a business has never been less expensive and more open than it is today. Shopify is the realization of that future, because it helps those budding entrepreneurs find their way at an extremely low cost.
In fact, Shopify is so good in this business that even Amazon.com, Inc. (NASDAQ:AMZN) backed off. It ceded this ground to Shopify. More than anything else, this victory against Amazon forced me to take a closer look at SHOP stock. And may I just say, it looks very good.