Shopify is an e-commerce giant that has gained significant traction over the past few years. The company has created a platform that enables small and medium-sized businesses to create an online presence and sell their products to customers worldwide. Shopify has revolutionized the e-commerce industry, and its stock has become a favorite of investors looking for high-growth companies. In this article, we will take a closer look at the success of Shopify and why its stock has become such a hot commodity.
Shopify’s Business Model
Shopify’s business model is simple yet effective. The company provides an online platform that enables small and medium-sized businesses to create an online store. The platform is easy to use and provides a range of tools that make it simple for businesses to set up their store, list their products, and manage orders. Shopify generates revenue by charging a monthly subscription fee and a transaction fee for each sale that is made through the platform. The transaction fee is typically lower than what businesses would pay if they were using a traditional payment gateway, which makes Shopify an attractive option for many businesses.
Shopify’s Growth Story
Shopify’s growth story is nothing short of impressive. The company was founded in 2006 by Tobias Lütke, Daniel Weinand, and Scott Lake. Initially, Shopify was intended to be an online store selling snowboarding equipment. However, the founders quickly realized that the e-commerce platform they had built was more valuable than the snowboarding equipment they were selling. They decided to pivot their business and focus on building the best e-commerce platform in the world.
Since its inception, Shopify has grown at an impressive rate. The company went public in 2015 and has seen its stock price rise by more than 5,000% since then. In 2020, Shopify’s revenue reached $2.9 billion, up from $1.1 billion in 2018. The company has continued to innovate and expand its offerings, which has contributed to its growth. In 2020, Shopify launched Shopify Balance, a financial product that enables businesses to manage their finances through the Shopify platform. The company has also expanded its presence in the physical retail space by launching a point-of-sale system and acquiring 6 River Systems, a fulfillment robotics company.
Why Shopify Stock is so Popular Among Investors
Shopify’s success has made its stock a popular choice among investors. There are several reasons why investors are attracted to Shopify. First, the company is benefiting from the growth of e-commerce. As more businesses move online, Shopify’s platform becomes more valuable, which translates into higher revenue for the company. Second, Shopify has a unique business model that generates recurring revenue. This provides investors with a degree of predictability and stability, which is rare for a high-growth company. Third, Shopify has a large and growing market opportunity. According to eMarketer, global e-commerce sales are expected to reach $4.9 trillion by 2025, up from $3.5 trillion in 2019. Shopify is well-positioned to benefit from this growth.
Another reason why Shopify’s stock is popular among investors is the company’s impressive financials. In 2020, Shopify’s revenue grew by 86% year over year, and the company generated $1.6 billion in free cash flow. The company has a healthy balance sheet, with more than $7 billion in cash and short-term investments. Shopify’s gross merchandise volume (GMV), which is the total dollar value of merchandise sold through the platform, exceeded $119 billion in 2020, up from $61 billion in 2018
