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The Bull Case for Shopify Stock Is More Relevant Than Ever

Matt McCall and the InvestorPlace Research Staff

Take a look at the opinions of e-commerce firm Shopify (NYSE:SHOP) and you’ll encounter a growing chorus of dissenting views. Since the beginning of November, Shopify stock has jumped nearly 60%. Just since the beginning of 2020, shares have returned over 18%.

The Bull Case for Shopify Stock Is More Relevant Than Ever

Source: Paul McKinnon / Shutterstock.com

Understandably, investors who are looking at this opportunity now are tempted but hesitant. Based on the company’s most recent earnings report, Shopify stock traded at over 24-times sales. To put this into context, hot names like The Trade Desk (NASDAQ:TTD) and Square (NYSE:SQ) traded at far lower price-sales (P/S) ratios, at 14.6 and 6.2, respectively.

Not only that, the current PS ratio for Shopify stock is around 38.6 — again greatly exceeding the ratios for the other two stocks. Therefore, it’s not unreasonable to believe that shares could experience a corrective pothole in the nearer term.

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However, a pothole is fundamentally what’s at stake here. As you know, I don’t base my investments on financial metrics for their sake alone. Instead, I look at megatrends, such as demographics and wholesale shifts in consumer behaviors. And, this latter engine is ultimately what’s catalyzing Shopify stock.

You don’t need to look far to realize that brick-and-mortar retailers are undergoing dramatic changes thanks to consumers’ fondness of online shopping. Most conspicuously, weaker companies in the space like Pier 1 Imports (NYSE:PIR) and drugstore chain Rite Aid (NYSE:RAD) face difficult roads ahead. Meanwhile, those physical retailers who are making it happen have developed their own online channels.

As one of the biggest megatrends, you don’t want to step in front of this train. E-commerce is steadily taking a greater share of the total retail pie, and that will only intensify in the future.

Shopify Stock Is Positioned for the E-commerce of Tomorrow

If you haven’t picked up on it already, one of my investment philosophies is to go where the money will be — not where it is right now. That’s one of the reasons why I’m not panicking about the coronavirus. As awful as this time is for the people and the families that are suffering, this crisis will thankfully fade.

Unless you’re strictly day trading, there’s no point in making dramatic changes to your portfolio on a temporary event. Instead, it’s an opportunity to build it on great stocks with strong upside narratives. And that’s exactly how I feel about Shopify stock.

If it corrects, it’d be a perfect opportunity to pick up shares on a discount. I’ve been a bull on the e-commerce firm for years because it exemplifies my philosophy of riding megatrends.

You may not know or care about brands like Allbirds or Kylie Jenner. You may think that social media influencers like Jeffree Star and Shane Dawson have no influence. That’s fine, but forgive my bluntness. It doesn’t matter what you personally think. These names and others are in fact very influential and they’re driving millennials and Generation Z to Shopify’s e-commerce platform.


It may be instructive to think about e-commerce not as a singular, giant entity — but rather a progression. In the initial phase of e-commerce, companies like eBay (NASDAQ:EBAY) and Amazon (NASDAQ:AMZN) set up the groundwork. Essentially, they proved that online shopping could work.

With that fact established, the second leg of the industry involves integrating lifestyle and fashion trends with direct-to-consumer relationships. This is where the role of social media influencers come in, giving brands “street cred.” And, this is also why Shopify has invested heavily in social media partnerships.

Undeniable Consumer Momentum

Additionally, the bullish case for Shopify stock doesn’t merely involve speculation that younger consumers will push it forward. The hard data backs it up.

Shopify's e-commerce platform market share in U.S.


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Source: InvestorPlace.com

Back in 2017, Shopify only had slightly over 8% of U.S. market share of e-commerce platforms. In 2018, that figure skyrocketed to 23%, and last year, market share increased substantially to 31%.

In just a few short years, Shopify went from a minor player on the edge of e-commerce to owning nearly a third of U.S. market share. That’s the kind of growth that you only see from large-scale shifts in consumer sentiment. More importantly, it implies that the competition is losing share in this pivotal race.

Therefore, I’m not worried about any near-term chop in the share price. As for metrics like P/S ratios? I don’t find them particularly useful for Shopify stock, as they miss the forest for the trees.

Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.

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