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Stock of the Week: Shopify

Still on top.

Andrew Willis 7 February, 2022 | 4:49AM
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Andrew Willis: If you had invested in Shopify (SHOP) a year ago. You’d have around the same amount of money today. Or maybe a bit less. But a lot of those losses are from recent days as longtime enemies, inflation and tech stocks faced off.

Meanwhile, our fair value estimate for the stock has been catching up throughout last year, from around 700 US Dollars to 1,070 today.

Our research suggests Shopify’s maintained its lead throughout the year in the small and medium business platform space, retaining merchants than anyone else. And we expect the company to continue bringing on new merchants – contributing to a five-year compound growth rate of 35%.

Looking ahead, investors should note that this growth is likely to come up against attrition in the customer base of small and medium-sized businesses. But senior equity analyst Dan Romanoff points out that there will also be successful merchants, who then become Shopify Plus enterprise merchants – growing alongside Shopify’s own fulfillment network that’s scaling up.

And what about merchants that just want to switch platforms? One funny thing about the company’s moat: merchants would need to run two platforms at the same time to make the switch - asides from the learning curve for their customers and data risks. Not easy, and likely far from what a Shopify merchant is looking for.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Shopify Inc Registered Shs -A- Subord Vtg42.61 CAD12.72Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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