From a conservative, fundamental investor perspective, the current valuation of Canadian technology giant Shopify Inc. (TSX:SHOP)(NYE:SHOP) could only be described as insane. Having traded around 50-times sales or revenue recently, this is by no means a cheap stock.
Investors may rightly now start to consider just how long the potential runway of growth could be for Shopify or any of its similarly valued peers. In this article, I’m going to highlight why I think the runway could actually be as long as most investors are implying today.
The bullish case for Shopify is obvious. E-commerce as a secular long-term growth trend is not only here to stay, but flourishing in this pandemic era. With more and more revenue being derived from online sales rather than in-person transactions, and this trend likely to continue to accelerate into the future, buying shares of the company that provides the key infrastructure for businesses to have online stores (i.e. the "picks and shovels" play) is a great way to play this structural transformation.
The speed of the acceleration of growth we’ve seen in e-commerce of late was on display during Shopify’s most recent earnings report. Shopify reported absolutely monster numbers, completely blowing away analyst expectations, beating estimates handily. As the bar for growth continue to get higher, Shopify continues to defy gravity, and I expect this to continue for some time. This is a stock that may never be cheap, or at least not reasonably priced from a valuation perspective for a long time.
Invest wisely, my friends.
