Shopify is a solid stock with massive growth potential
The pandemic has worked in favour of Shopify (NYSE:SHOP). The e-commerce stock has stellar financials and continues to expand its market share. Tech stocks are popular in the post-pandemic world but the SHOP stock has a league of its own. It has managed to attract new users and reported impressive numbers. Shopify is a solid growth stock that will soar despite being on the higher side. It has the potential to generate massive returns in the long term.
The stock hit an all-time high of $1640 in July and is trading close to $1360 today. Let’s dig deeper into the catalysts working for the SHOP stock.
Abundant Room To Grow Its User Base
Shopify is a premier platform that is used by merchants to sell goods and services. Due to the pandemic, there came a digital revolution and the merchants who did not have an online presence had to move towards the online platform so as to continue generating revenue. The company has more than 1.7 million merchants currently and the majority of them are in Northern America. This means Shopify has massive growth potential across different regions in the coming months.
The company recently launched Shopify Markets. It is a platform that will allow merchants to handle global commerce opportunities. Hence, they will not have to go through the complexities of international transactions and can easily sell across the world.
This is a huge step towards attracting new merchants to the platform. It is a step that will make international transactions easier for online retailers and Shopify will have a first-mover advantage here. The exclusive partner for this platform is Global-E (NASDAQ:GLBE) and the deal will last for three years with possible extensions. This move will lead to a surge in the merchants on the platform.
In order to attract users to the platform, Shopify is also working on strategic partnerships. It joined TikTok Shopping in August and has introduced a new feature that will allow merchants to add a shopping tab on their TikTok profile.
The growing popularity and increasing users on TikTok will help generate higher user interest for Shopify. The project is only available to users and merchants in the US and UK. The company is working on product links that will allow merchants to tag the products in their TikTok posts, making it easier and convenient for users to shop. This partnership will allow Shopify to expand its users through the popular social media platform.
Shopify is making the right moves and is headed in the right direction. The partnerships and global expansion strategy will reap results. The company has already reported impressive fundamentals for the second quarter. Its revenue crossed $1 billion for the first time and jumped to $1.12 billion, a 57% rise year over year.
The merchant solutions revenue stood at $785.2 million and subscriptions solutions revenue increased by 70% and hit $334.2 million. The net income hit $879.1 million which is a huge rise from the net income of $36 million in the same period the previous year.
Investors look at the fundamentals of a company when making a decision to invest. When it comes to Shopify, there is nothing to worry about. It has a healthy balance sheet with strong fundamentals.
The Bottom Line
Shopify has everything that makes a winning company. It is making the right strategic partnerships, targeting new merchants and offering features that make the merchants stay on its platform.
With strong fundamentals and a massive growth opportunity, the Shopify stock could generate solid returns for investors in the long term.
Not Investment Advice
Note: Views expressed are those of the writer. The author does not own any stocks mentioned. The article is information, not advice. Share prices can rise and fall. Past returns are not a guide to the future. Please do your own research.