Every so often, a company hits the jackpot with just the right offering at just the right moment.
While a million dollars might not seem like a fortune these days, reaching that milestone in your investment portfolio still carries significant weight, both financially and psychologically. Achieving this goal hinges on three key actions: committing a substantial sum, consistently adding funds, and making savvy investment choices.
In light of this, investors on the hunt for promising stock picks should definitely keep Shopify (SHOP -3.69%) on their radar. This company has been on an upward trajectory recently, and it seems poised for continued impressive gains.
### Understanding Shopify
To comprehend why Shopify is a strong bet, it’s useful to draw comparisons with the e-commerce giant, Amazon (AMZN -1.07%).
Let’s start from the beginning.
If you cast your mind back to the mid-’90s, the internet was fresh, dial-up connections were commonplace, and online shopping was still a novelty. Amazon was then just a small, intriguing company challenging physical bookstores.
Fast forward a few years, and this small enterprise had the entire U.S. retail sector on edge. Amazon.com evolved not only into a consumer favorite but also into a go-to for brands looking to sell their products online.
However, the vast scale and nature of Amazon’s platform turned it into a bit of a free-for-all. Some third-party sellers on the site often fall short of honesty, which can frustrate both buyers and ethical sellers. Moreover, merchants began to realize that by using Amazon, they were, in a sense, boosting Amazon’s business rather than their own.
Enter Shopify.
Since its launch in 2006, Shopify has positioned itself as the alternative to Amazon. It empowers brands and merchants to set up and manage their own online stores, allowing for direct customer relationships. This means sellers aren’t constantly pitted against competitors like they are on Amazon’s marketplace.
Fast forward to today, and Shopify’s growth speaks for itself. With millions of online stores using its platform, Shopify facilitated $292 billion in sales last year and reported $8.9 billion in revenue. These figures represent a year-on-year increase of 24% and 26%, respectively, and this growth wave shows no signs of ebbing.
### Why Shopify Is Compelling
The Shopify narrative is compelling, yet it’s hardly new. With shares soaring nearly 400% from its post-pandemic low in 2022 and trading at over 80 times the projected earnings per share of $1.50 for this year, some might think there’s limited potential left to exploit.
But sometimes a company’s future is so promising that the market prices in several years of anticipated earnings growth from the get-go. There’s every indication Shopify will continue on its upward trajectory.
Part of its growth comes from a shifting reality: Brands and smaller companies realize they can independently achieve what they used to rely on Amazon for. Without Amazon acting as the middleman, businesses are better positioned to gather customer insights and form authentic customer relationships.
As it happens, consumers increasingly desire personalized and genuine interactions when purchasing goods and services. Shopify provides an avenue for sellers to offer just that, whereas Amazon doesn’t quite hit the mark.
Meanwhile, the e-commerce landscape continues to expand rapidly.
Per the U.S. Census Bureau, only 16% of retail spending in the U.S. was online by the end of last year. The majority still happens in physical stores. While some shopping will inevitably remain in-person, a substantial portion is still up for grabs. Research from eMarketer anticipates that the U.S. e-commerce market will grow annually by around 9% through 2028, outstripping overall retail growth.
Additionally, Shopify is extending its reach internationally, presenting equally compelling opportunities to help foreign brands connect directly with consumers. eMarketer forecasts that international e-commerce growth will mirror domestic trends from 2024 to 2027.
Already a leader in the e-commerce platform space, Shopify stands to capture a significant portion of this growth.
### A Sound Purchase for Patient Investors
Despite the optimistic outlook, no investment is entirely devoid of risk.
For instance, Amazon could tighten its seller criteria, which might enhance its credibility and competitiveness. Plus, Walmart’s e-commerce model, which includes selected third-party sellers, poses competition to Shopify’s expansion.
There are valid concerns regarding Shopify’s valuation too.
While current and future price-to-earnings ratios seem typical for a rapidly expanding tech company, they imply vulnerability. Should Shopify falter in any way, the stock—currently priced for nothing less than perfection—could face setbacks.
### Embracing the Long-Term Perspective
Ultimately, investing isn’t merely about purchasing stocks; it’s about acquiring stakes in companies. More broadly, it’s about buying into the core ideas driving these companies, which will influence stock performance over time.
Seen in this light, Shopify emerges as one of the few promising market players that could help bolster your path to millionaire status. However, it’s crucial to view it as a long-term investment that may exhibit volatility along the way.
