The Canadian supplier of e-commerce platform Shopify (NYSE 🙂 has continually proven that his critics are wrong. The Ottawa-based Shopify, which makes tools that enable small businesses to create websites and trade across multiple channels, was the target of short-sellers in the last 15 months, but a recent rally in its share price shows that it is difficult to derail the company from its growth path.
After each correction in the past 12 months, Shopify's stock has become stronger, which has led to many calls for stagnation of growth. Acting at $ 189.76 at the end of Friday, the stock has risen 38% this year, far better than that of its much bigger rival Amazon (NASDAQ :), which has won 5.3%. Shopify shares have risen 570% since the IPO in 2015.
Week Map of Shopify
The power of Shopify
One of Shopify's main strengths is that it offers small businesses a very effective and cost-efficient way to build a secure online store. The platform handles all hardware security, data backup and payment processing aspects of the business, allowing traders to more easily focus on their core business.
However, the founder of Citron Research, Andrew Left, a well-known short seller, believes that the fast growth of Shopify is dependent on small traders, the majority of whom would never become sustainable companies. Eventually the company will reach a saturation point and its growth will stagnate, says Left.
The short call from Left, which he made in October 2017, remained a major brake on the shares of Shopify last year. But this year's price action shows that investors are ignoring the doom scenario that he had in mind when he predicted that the shares would drop to $ 100.
Instead, investors become optimistic about Shopify's future, especially as the company's earnings momentum does not show any signs of delay. During his profit report last month, Shopify stated that its sales had surpassed the $ 1 billion mark for the first time. For the fiscal year 2019, it expects that the turnover will increase by another 36%.
In contrast to the prediction of Citron, the number of Shopify shoppers continues to grow. Those who use Shopify's online platform to execute their web-based and physical shopping activities exceeded more than 800,000 last year, of which 24% are now outside the English-language core markets of North America, Great Britain and Australia.
The utility of the Shopify platform is no longer limited to small and medium-sized operators. Some of the world's largest brands, including Johnson & Johnson (NYSE), Unilever (NYSE) and fashion brand Jones New York, now use Shopify for their digital needs, along with more than 5,000 Shopify Plus customers version of the platform for large customers. The company also increases sales of new services in recent years, including merchant financing, shipping and fraud protection.
Bottom Line
After a remarkable run in 2019, Shopify shares are trading near the 52-week high. Previous trade patterns suggest that a short-term pullback may soon come. But that correction should be an opportunity to take a long-term position in this great growth story.
Shopify shares continue to perform better than the general market perception in the past year. The company will start in a much stronger position in 2019, with $ 1.5 billion in cash and one million customers within reach. Analysts expect more than 50% annual revenue growth per year over the next five years. With this positive background, we believe that Shopify will prove to be a good long-term bet.
