He S&P 500 It returned an average of 285% over the last five bull markets, and the next one is approaching. The index is just five percentage points away from a record high, the most conservative indicator of a new bull market.
Investors hoping to profit should buy shares today, and buy (TRADE 1.43%) It is worth considering. The e-commerce software company has seen its stock price rise 375% over the past five years, and the next bull market could send the stock much higher.
Shopify has a strong presence in retail e-commerce
research company Gartner It recently ranked Shopify as a leader in digital commerce software, citing greater ability to execute than any other provider. In fact, the company has become a cornerstone of the retail industry. Shopify merchants accounted for more than 10% of online retail sales in the US last year, making it the second-largest national market. e-commerce company behind Amazon.
That prolific presence in the market is the result of its strong product offering. Shopify provides software that allows merchants to manage their businesses across physical and digital sales channels, and offers adjacent services that address everything from payments and logistics to expense and tax management. Their platform also features thousands of third-party integrations that further expand its functionality.
Shopify reported impressive financial results in the third quarter. Revenue rose 25% to $1.7 billion, driven by strong sales growth in subscription software and adjacent business services. Shopify also returned to generally accepted accounting principles (GAAP) cost effectiveness. His net income improved to $718 million, compared to a loss of $159 million the previous year. Investors have good reason to expect similar momentum in the future.
Looking ahead, e-commerce retail sales are expected to grow 8% annually to reach $8 trillion by 2030. Shopify will undoubtedly benefit from that tailwind. However, the company also has significant growth prospects in wholesale e-commerce, as well as untapped monetization opportunities with artificial intelligence (AI) products that investors may be overlooking.
Shopify has a huge growth opportunity in wholesale e-commerce
Shopify Plus is a commerce platform for larger businesses. It is the most popular omnichannel commerce software product on the market, according to research company G2. Additionally, merchants gain access to exclusive tools and features, including more detailed organizational settings, customizable payment options, and sophisticated applications for data analytics, marketing, workflow automation, and business-to-business (B2B) e-commerce.
The recent addition of B2B capabilities is particularly notable because it unifies wholesale and retail functionality on a common platform. That makes Shopify a more attractive option for businesses of all sizes, but it should be particularly useful for onboarding more enterprise-scale merchants.
Additionally, B2B capabilities allow Shopify to access a market roughly four times larger than that of retail e-commerce. Straits Research expects e-commerce wholesale sales to increase 19% annually to reach $36 trillion in 2031.
Shopify has untapped growth opportunities in artificial intelligence
Shopify introduced marketing software for Shopify Plus merchants in May 2022. The product, called Shopify Audiences, uses machine learning algorithms powered by buyer data collected on the platform to compile lists of potential customers.
These lists can be exported and used to target advertising campaigns on various platforms, including Google Search and YouTube, using AlphabetFacebook and Instagram for MetaplatformsSnapchat by Breakand TikTok. Shopify Audiences is currently free, but the company will almost certainly monetize the product at some point in the future.
The same logic applies to Shopify Magic, a set of free AI features that recently became available on the Shopify platform. Magic uses a natural language interface to allow merchants to automate a variety of business workflows, from redesigning storefronts and creating discounts to writing product descriptions and running sales reports.
When (and if) Shopify decides to monetize its AI software products, the company will take advantage of a market forecast to grow 23% annually to approach $1.1 trillion by 2032.
Shopify Stock Trades at a Cheap Valuation by Historical Standards
Shopify should benefit from the growing prevalence of retail e-commerce, but the company also has growth prospects in wholesale e-commerce and untapped monetization opportunities with its AI products.
With this in mind, Morningstar analyst Dan Romanoff believes Shopify could grow revenue 23% annually over the next five years. That forecast places its current valuation at 14.2 times sales Seems reasonable, especially when the three-year average is 25 times sales. That's why investors should buy some shares of this monster. growth stock today.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors. Trevor Jennewine It has positions in Amazon and Shopify. The Motley Fool positions and recommends Alphabet, Amazon, Meta Platforms, and Shopify. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.
