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SHOP Stock: Will it Continue to Shine?

Leading e-commerce platform Shopify (NYSE:SHOP) continues to blow away the expectations of even the most bullish investors and analysts. Indeed, SHOP stock has continued to be one...
SHOP Stock: Will it Continue to Shine? © Reuters. SHOP Stock: Will it Continue to Shine?

Leading e-commerce platform Shopify (NYSE:SHOP) continues to blow away the expectations of even the most bullish investors and analysts. Indeed, SHOP stock has continued to be one of the best performing Canadian growth stocks, fueled by impressive earnings.

During Shopify's most recent quarter, the company crushed analyst estimates. This earnings beat allowed SHOP stock to remain stable at around all-time highs. (Shopify ran up into earnings in a big way).

The company's revenue surged 57% to $1.11 billion in the second quarter. Among the segments driving this growth was Subscription Revenue. This recurring revenue stream surged 70%, due to an increased number of merchants across the platform. Merchant Services grew by 52%, as did the company's overall user base.

However, growth in gross merchandise and revenue slowed down a bit from the previous quarter. This was somewhat to be expected, given the outsized growth rates following the pandemic.

That said, investors may not know where this stock could be headed from here. It's a growth stock with a high valuation, and everything is pointing in the right direction. However, Shopify will need to execute perfectly to see more substantial growth from here.

I'm bullish on Shopify's ability to do so. Let's dive into why. (See SHOP stock charts on TipRanks)

Value Drivers to Shopify’s Success

According to eMarketer’s predictions, by the end of 2022, 20.4% of all retail sales will happen online. Adding to these numbers, the research firm calculated a CAGR of 22.9% in the e-commerce sector from 2022-2027.

That's a hefty growth rate for any sector. It's also above the 15% hurdle that provides for a doubling every five years.

For SHOP stock, the growth catalysts underpinning the e-commerce transition are strong. Shopify's focus on developing its various verticals and business segments should bode well over the long-run. Via Shopify Payments as well as the company's capital and shipping programs, there's a tremendous amount of potential for Shopify to capture more of the value chain along the way.

Additionally, Shopify's partner ecosystem is growing fast. This ecosystem has provided the company with a range of unique solutions that make merchants' lives better.

The more value Shopify can provide its e-commerce clientele, the better off investors in SHOP stock will be over the long-term.

Escalating Partnerships

As mentioned, partnerships have become a key growth strategy implemented by Shopify. This could be a lever that allows Shopify to grow its revenue lighting fast, without having to put up the capital.

Among the company's partnerships that are noteworthy are those with third-party sales platforms. The company recently teamed up with viral video-sharing app TikTok. It goes without saying that the reach this partnership could provide is nearly endless.

In addition to this recent high-profile partnership, Shopify has partnered with other mega cap players such as Alibaba (NYSE:BABA), Amazon (NASDAQ:AMZN), Walmart (NYSE:WMT), among others. 

Moving forward, analysts believe that Shopify can also levy e-commerce fees on these merchants, somewhat similarly to Amazon.

However, an increasing amount of companies are seeking to provide e-commerce software services. This could add further competition to Shopify over the long-term.

Here for a Good, Long Time

Wall Street expects Shopify's earnings to soar 66% in 2021. While the company's earnings growth is expected to slow somewhat, it will continue to grow likely in line with the company's stock price. Thus, investors will be keeping a close eye on the pace of Shopify's earnings growth from here.

Both consumers and merchants shifted online during the pandemic, in a big way. Accordingly, it's to be expected that Shopify would see a deceleration of growth as pandemic restrictions were lifted. Still, the e-commerce platform hopes to see continued rotation in customer spending toward e-commerce and away from traditional bricks-and-mortar retail.

During the past three years, Shopify's EPS grew 230%, while sales grew 65% annually. Investors are typically advised to look for stocks with sales growth of at least 25%. Accordingly, SHOP stock really blows most growth stocks out of the water right now.

All these data suggest that Shopify is here to stay for a long time, and investors are hoping to make it a good time by stocking up on SHOP stock.

What Analysts are Saying on SHOP Stock

As per TipRanks' analysts rating consensus, SHOP stock is a Moderate Buy. Out of 26 ratings, there are 16 Buy recommendations and 10 Hold recommendations.

The average Shopify price target is $1,735. Analyst price targets range between a high of $2,000 per share and a low of $1,450 per share.

Bottom Line

SHOP stock certainly ticks off various boxes that growth investors generally look for. It was a massive winner in 2019 and 2020, posing threats to big names like Amazon and eBay (NASDAQ:EBAY). Further, its expansion plans and key acquisitions open new avenues for growth. 

In simple terms, Shopify investors should benefit from holding this stock over the long-term. Sure, volatility is likely to come and go, and no one knows what the future holds. However, owning companies tethered to strong secular catalysts such as e-commerce has proven to be a solid long-term investment strategy.

Disclosure: At the time of publication, Chris MacDonald did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates, and should be considered for informational purposes only. TipRanks makes no warranties about the completeness, accuracy or reliability of such information. Nothing in this article should be taken as a recommendation or solicitation to purchase or sell securities. Nothing in the article constitutes legal, professional, investment and/or financial advice and/or takes into account the specific needs and/or requirements of an individual, nor does any information in the article constitute a comprehensive or complete statement of the matters or subject discussed therein. TipRanks and its affiliates disclaim all liability or responsibility with respect to the content of the article, and any action taken upon the information in the article is at your own and sole risk. The link to this article does not constitute an endorsement or recommendation by TipRanks or its affiliates. Past performance is not indicative of future results, prices or performance.

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28-09-2021 01:37:02 (UTC+7)

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 EUR/USD1.1704Sell
 GBP/USD1.3712Neutral
 USD/JPY110.97Neutral
 AUD/USD0.7288Sell
 USD/CAD1.2617↑ Sell
 EUR/JPY129.89↑ Sell
 EUR/CHF1.0833Neutral
 Gold1,750.95Sell
 Silver22.692↑ Buy
 Copper4.2847↑ Buy
 Crude Oil WTI75.33↑ Sell
 Brent Oil78.57↑ Sell
 Natural Gas5.707Buy
 US Coffee C194.98↑ Buy
 Euro Stoxx 504,165.48↑ Sell
 S&P 5004,449.53↑ Sell
 DAX15,573.88↑ Sell
 FTSE 1007,063.40↑ Sell
 Hang Seng24,208.78↑ Buy
 Small Cap 20002,296.00Neutral
 IBEX 359,002.90Buy
 BASF64.740↑ Sell
 Bayer47.47↑ Buy
 Allianz196.19↑ Buy
 Adidas278.80↑ Sell
 Lufthansa6.561↑ Buy
 Siemens AG147.27↑ Sell
 Deutsche Bank AG11.120↑ Buy
Mua/Bán 1 chỉ SJC
# So hôm qua # Chênh TG
SJC Eximbank5,665/ 5,715
(0/ 0) # 900
SJC HCM5,635/ 5,700
(0/ 0) # 885
SJC Hanoi5,635/ 5,702
(0/ 0) # 887
SJC Danang5,635/ 5,702
(0/ 0) # 887
SJC Nhatrang5,635/ 5,702
(0/ 0) # 887
SJC Cantho5,635/ 5,702
(0/ 0) # 887
Cập nhật 28-09-2021 01:37:04
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ↀ Giá vàng thế giới
$1,751.23+1.730.10%
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ʘ Giá bán lẻ xăng dầu
Sản phẩmVùng 1Vùng 2
RON 95-IV2204022480
RON 95-II,III2194022370
E5 RON 92-II2071021120
DO 0.05S1658016910
DO 0,001S-V1693017260
Dầu hỏa1564015950
ↂ Giá dầu thô thế giới
WTI$75.40+0.30.39%
Brent$79.44+0.420.53%
$ Tỷ giá Vietcombank
Ngoại tệMua vàoBán ra
USD22.630,0022.860,00
EUR25.993,7727.346,60
GBP30.324,2231.591,18
JPY200,45212,05
KRW16,7520,39
Cập nhật lúc 18:54:42 27/09/2021
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