This e-commerce stock is a go-to for independent sellers
- Shopify is on track to ring up continued gains.
Will Healy (Shopify): When it comes to online selling, more merchants seem to gravitate to the platform created by Ottawa, Canada-based Shopify (SHOP -0.34%).
The company created a no-code, easily customizable sales site entrepreneurs can set up without hiring an IT professional. Additionally, its merchant services segment offers numerous ancillary services needed by online sellers, allowing customers to handle most online selling-related functions within Shopify’s ecosystem.
Such functionality has helped it compete with WordPress plug-in WooCommerce and no-code website builders such as Wix (WIX -1.31%). It also enables merchants to sell without the fees that come with selling on Amazon’s (AMZN -0.86%) website.
These advancements helped it earn $3.9 billion in revenue in the first half of 2024, a yearly increase of 22%. Over the same period, its net loss was $111 million, down from a loss of $1.2 billion in the same year-ago period.
Still, it earned $170 million in net income in Q2, indicating it has returned to profitability after backing away from a capital-intensive plan to build a fulfillment network.
Also, the 60% rise in the stock price over the last year indicates that investors approved of selling the fulfillment business.
Investors also seem to take its valuation in stride. The 83 P/E ratio is not a useful measure considering the recent move to profitability, but investors will probably perceive its price-to-sales (P/S) ratio of 14 as acceptable, given its rapid growth.
This is not to say the stock does not have challenges. The aforementioned 22% revenue growth is substantially slower than growth rates before and during the pandemic. Also, Shopify pushed through a price increase of up to 34% in February, and it is too early to tell if Shopify will experience significant turnover with that decision.
Nonetheless, Grand View Research believes the global e-commerce industry will grow at a compound annual growth rate of 19% through 2030. As its industry continues to expand, the stock is likely to continue rising over time.
