Shopify (NYSE:SHOP)

Shopify has made it easier for over a million organizations to start, run, and grow their business. And with ecommerce sales in Shopify’s target geographies representing approximately 15% of total retail sales, there is tremendous opportunity to increase the volume of merchandise sold on their platform and attract new merchants.

The numbers they delivered in 2020 were impressive. For example:

More merchants are using Shopify. Revenue increased by $279.4 million, up 53% year over year.
Gross Merchandise Volume (GMV) exceeded $41 Billion in the fourth quarter and $120 Billion for 2020
Merchant Solutions revenue growth increased 117% because of GMV growth
Monthly Recurring Revenue (MRR) for 2020 was $82.6 million. Growth accelerated to 53% year-over-year with MRR due to the continued high number of new merchants joining the platform which was likely accelerated by the pandemic

In addition, Non GAAP earnings were $1.58 vs. a consensus estimate of $1.25 and Shopify expects to grow at over 30% annually through at least 2022.

So how much additional growth is ahead of Shopify given their $181 billion market cap? In addition to the ongoing ecommerce tail winds, they are building out their service offering.

Shopify Fulfillment Network is a robotics-driven warehouse that helps businesses fulfill their products fast and affordably. Shopify plans on spending over $1 billion to expand this network which will allow their merchants to better serve their end customer. Also, for many merchants, it’s a better value than the comparable Amazon service, Fulfillment By Amazon, which may attract more merchants to the Shopify.
Shopify Capital provides funding designed for business owners. It allows them to get capital based on their history with Shopify and skip the lengthy application processes. Plus, with the data Shopify collects on their merchants, it allows them to make better capital allocation decisions increasing the safety and profitability of loans.

Both of these services will help drive additional top line growth.

And let’s not forget about their $6.39 billion cash position. Whether it’s a tuck in acquisition or additional infrastructure investments to further expand their services, they have the firepower to make investments that can drive topline revenue.

There’s no doubt that at a 60+ price/sales, Shopify is priced for perfection. But, their strong financial position, optionality and quickly expanding moat could make it one of the best companies of it’s generation. If you have a longer term time horizon, then Shopify should be in your portfolio.