Last month, the shares of e-commerce firm Shopify (NYSE: SHOP) reached a new peak at the New York Stock Exchange, but pared some of the gains later. The stock has an impressive track record and is bound to bounce back. The company’s market value more than doubled so far this year, outperforming the sector and its peers Amazon (AMZN) and eBay (EBAY), which gained 18% and 40% respectively during the period.
The sentiment about the stock has been quite bullish after market watchers hinted that Shopify could be a strong competitor to Amazon in the near future, though some are of the view that the stock is overpriced. The recently launched Shopify Fulfillment Network is believed to be more efficient and cost-effective than the one operated by Amazon, in making merchandise deliveries.
The Canada-based company has also enhanced its warehousing capabilities through strategic acquisitions for supporting the delivery system. Currently, efforts are on to strengthen the capital position to meet future investment goals, which also includes acquisitions.
Alternative to Amazon
Those who are aware of Amazon’s phenomenal growth in a relatively short period of time and the surge in its market value would not want to miss the opportunity Shopify offers. The strong prospects of Shopify growing into an alternative to Amazon makes the stock appealing to long-term investors. It has been one of the best-performing stocks so far this year. It needs to be noted that in the past, not many e-commerce firms were as successful as Shopify.
Having said that, it would not be a cake walk for the company to take on a tech giant like Amazon, which is almost everywhere in the retail space. But, the sector has enough space for multiple players to flourish, and is growing fast as people continue to dump the brick-and-mortar model and switch to online shopping. However, in the event of market conditions turning hostile, Spotify will be a lot riskier than Amazon.
Financials
In the second quarter, the company’s earnings more than doubled to $0.14 per share as revenues grew in double digits. Though the top line growth decelerated in the recent quarters, Shopify has improved its overall financial position consistently, all along returning value to shareholders.
New Avenues
As part of the expansion initiatives, Shopify recently launched a platform to help CBD merchants in the US. The move allows the company to take advantage of the current momentum in the local CBD market, as it did in Canada where its network is widely used for retail sales of recreational cannabis.
Also see: Shopify Q2 2019 Earnings Conference Call Transcript
The combination of e-commerce and cannabis – two thriving industries – should attract more Wall Street investors to the stock in the future. That justifies the buy rating on the stock assigned by the majority of analysts following it. The average price target is about $362.