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Potentially, Shopify might emerge as an outstanding investment choice in December.

Online retail sales proportion.
Online retail sales proportion.

Potentially, Shopify might emerge as an outstanding investment choice in December.

Shopify's business is once again thriving, much like during the pandemic lockdowns. And guess what? Wall Street isn't missing a beat. The commerce platform's stock skyrocketed an impressive 48% through November 2024, nearly doubling the year-to-date rally in the S&P 500.

So, what's the reason behind this surge? Let's dive into why Shopify is a solid investment choice for your portfolio in December.

Dominating the Market

Shopify is steadily claiming its share in the vast and expanding e-commerce market. This division recently accounted for a whopping 16% of the entire retailing industry, matching its high from the pandemic following a nearly two-year decline since late 2020.

The platform has taken full advantage of the 2024 demand rebound, with sales volumes surging over 20% year-over-year in each of the last five quarters. Overall revenue for the last quarter witnessed a 26% boost due to higher transaction and subscription fees. Subscription charges are a goldmine, as they boost profit margins and encourage customer loyalty.

Financially Sound

Shopify is playing follow the leader in the tech world, learning from successful corporate titans like Apple. The tech giant is shifting its focus towards service-based tech businesses, which offer a steady income stream and higher profit margins compared to hardware sales.

It's evident that this strategy is working wonders for Shopify. Their services segment is already contributing to these important metrics, with monthly recurring revenue up an impressive 28% in Q3. Moreover, cash flow and profit margin rates have also shown a positive trajectory, bouncing back to the record high levels set during the early phases of the pandemic.

Smart Use of Capital

Shopify's pockets are overflowing with capital, and the company has plenty of avenues to put it to good use for future growth. This could include upgrading services like payment processing, marketing, deeply integrating AI into the platform, and more. By excelling in these areas, Shopify can attract, engage, and retain more merchants, leading to higher transaction fees over time.

Now, let's face it, Shopify stock isn't exactly a bargain right now. Shares are trading near their pre-pandemic high of $150. However, if you're comfortable with the risks, Shopify has the potential to be an exceptional long-term investment for the years ahead, as it grabs an even larger piece of the e-commerce pie and handles an increasing number of transactions on its popular POS system.

Shopify will likely update investors on how its holiday shopping season fared in early 2025, following an impressive 2023-2024 performance. Although you don't have to wait for this clarity to invest, if you're looking to establish a small position in this attractive growth stock, now might be an opportune time.

The surge in Shopify's stock can be attributed to its dominant position in the e-commerce market, which accounted for 16% of the retail industry in 2024. With a 26% boost in revenue from higher transaction and subscription fees, Shopify's financially sound position makes it a solid investment choice for those comfortable with risks, as it has the potential to be an exceptional long-term investment for the years ahead. Investors may want to consider establishing a small position in this growth stock, as Shopify continues to grab a larger piece of the e-commerce pie and handle an increasing number of transactions on its popular POS system.

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