Where Shopify (TSX:SHOP) Stock Could Be in 5 Years
The Motley Fool
Published Apr 21, 2021 11:45
Updated Apr 21, 2021 12:15
Where Shopify (TSX:SHOP) Stock Could Be in 5 Years
An obscure snowboard shop is the least likely enterprise that could become the largest publicly listed company on the Toronto Stock Exchange (TSX). Royal Bank of Canada held the throne for years until Shopify (TSX:SHOP)(NYSE:SHOP) unseated the banking giant.
Today, the company that provides an e-commerce platform for merchants worldwide has a market capitalization of $185.35 billion. You can safely assume it’s the smaller version of Amazon.com (NASDAQ:AMZN). In the TSX, Shopify is in a league of its own. The astonishing rise to prominence is unlike no other. But what would the future be like five years from now? The share price could be three times more.
Phenomenal returns The total returns of the premier tech stock are incredible. Had you invested five years ago, its total return would be 3,691.67% (106.74% CAGR). If you took a position three years back, the total return would be 920.5% (116.3% CAGR). The current share price of $1,510.34 is 104% higher than it was a year ago. Thus far, in 2021, the year-to-date gain is only 5.08%.
In the 2019 TSX30 list, a flagship program recognizing the 30 top-performing stocks, Shopify ranked second to Canopy Growth. Last year — or the second edition of TSX30 — the tech stock was on the top spot, with Ballard Power Systems a far second.
Spirit of entrepreneurship Thousands of small business owners and customers converge on Shopify’s e-commerce platform. First-time sellers can set up shop in minutes and peddle their products online. Web designers are charmed by the feel of the shops. Flexible pricing favours high-volume sellers. For buyers or customers, the shopping experience is fantastic.
Shopify’s powerful servers provide a straightforward interface, where merchants can build the exact shop they want. Harley Finkelstein, Shopify’s president, said the spirit of entrepreneurship was strong last year. Total revenue increased by 86% to $2.9 billion versus 2019. The company posted a net income of $319.5 million compared with the $124.8 million net loss in the preceding year.
Finkelstein said during the earnings presentation, “Shopify is at the heart of our merchants’ businesses with entrepreneurs around the world trusting us with their livelihoods.” While the company expects to grow its revenue rapidly in 2021, management did not issue specific revenue guidance for the year. Shopify predicts the revenue growth to be lower compared to the blowout figure in 2020.
Rich ecosystem of merchants Shopify is forward looking, and not precisely within a five-year horizon only. The goal is to build a 100-year-old company with a rich ecosystem of merchants, partners, and communities. The groundbreaking has begun following the collaboration with Operation HOPE. Shopify will help the organization create one million new black-owned businesses in the U.S. by 2030.
Get The App
The company forged strategic partnerships with the Government of Canada (Go Digital Canada), the New York State government (Empire State Digital), and Australia’s Victoria state government (Small Business Adaptation Program). Shopify expects to bring thousands of small businesses online and help them adapt to a digital economy.
If I were to assess where Shopify could be five years from now, it should be a massive competitor to Amazon, eBay (NASDAQ:EBAY), and similar players in the digital marketplace. However, the ongoing platform improvements and best-laid plans that align with industry growth trends should set Shopify apart.
The post Where Shopify (TSX:SHOP) Stock Could Be in 5 Years appeared first on The Motley Fool Canada.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Fool contributor Christopher Liew has no position in any of the stocks mentioned. Tom Gardner owns shares of Shopify. The Motley Fool owns shares of and recommends Amazon, Shopify, and Shopify. The Motley Fool recommends eBay and recommends the following options: short June 2021 $65 calls on eBay, long January 2022 $1920 calls on Amazon, and short January 2022 $1940 calls on Amazon.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2021
This Article Was First Published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.